[governance] FW: TP: city government exercising policy on Google Applications / consumer rights / Consumer Protection Act / trial period

Wed Jul 13 14:31:36 EDT 2011

Phillippe

Thanks for the thoughtful response, You are more optimistic than I on how bureaucracies work. I don't think we can work past that point so I'm not going to pursue it further. It may that you are correct that such a treaty could be worked out.

My objections to going forward with such a treaty are more philosophical than the details of how such a treaty would work. In general for such a treaty to work there would need to be a mechanism to identify and track each and every user on the Internet. I am philosophically opposed to that. Such a mechanism could too easily be subverted for other uses. This will probably happen anyway but I will oppose it wherever I can.

Regarding your last paragraph we are in agreement. The Internet is fundamentally changing the way we think of IP. My belief is eventually there will be no such thing as IP. We will be back to a time where ideas are freely passed between people as in a stranger shows up at the campfire and shows the locals how to make a better arrowhead or a new hunting chant. Trying to control the flow of ideas on the Internet without severe intrusion by governments will be about as effective as the person that invented a better arrowhead trying to get compensated for the idea or even figuring out who is using the idea. How this will work in a modern setting will take many years to settle out and will be very disruptive to existing industries and governing bodies.

And yes, I agree, as long as money is changing hands someone will be trying to tax it. If that tax will be accepted by the constituents is a different matter. Look what happened when the British tried to tax tea when the constituents of one jurisdiction thought the tax shouldn't apply to them.

As an aside the jurisdiction I live in, Canada, has some proposed legislation that will allow the government to track users that use Canadian ISPs to the level needed that allows treaties like this to function. This to me is far scarier and more important than the tax issues we are discussing. The tax issues are important but to my mind the fact that a country that professes to be one of the freest countries in the world is considering this is a far more important issue. My fear is that governments will use issues like taxation to justify loss of freedom on the Internet.

Kerry Brown

From: Philippe Blanchard <philippe.blanchard at me.com<mailto:philippe.blanchard at me.com>>
Date: Wed, 13 Jul 2011 17:27:09 +0200
To: "governance at lists.cpsr.org<mailto:governance at lists.cpsr.org>" <governance at lists.cpsr.org<mailto:governance at lists.cpsr.org>>, Kerry Brown <kerry at kdbsystems.com<mailto:kerry at kdbsystems.com>>
Subject: Re: [governance] FW: TP: city government exercising policy on Google Applications / consumer rights / Consumer Protection Act / trial period

Dear Kerry,

Thank you for pushing this discussion a bit further.

I know there are many constraints. Not only for pure internet players but even more for "click and mortar" players... and on I am clearly aware I am on a rather simplistic, Manichean, approach.

  *   I fully agree that setting a structure whose responsibility would be to collect the money and then redistribute it to the national jurisdiction would be tedious, expensive and... irrelevant. The state level is no more relevant and I am not sure the question is about redistributing any money back to the national government.... but to diminish the level of funding currently required by the UN and their agencies. This international responsibility would be linked to an international legitimacy to collect taxes. The question of the several national jurisdiction would then be solved by the fact there would be only one, international, rule applying to all.
  *   Then, regarding the "additional layer of bureaucracy", I do not see it as an "additional" layer since this international jurisdiction would supersede the national ones.  We all remember the TOBIN tax proposal (a taxation on international financial transactions)...
  *   Most of the international transactions are already monitored and consolidating the information should not require armies of public officers but an international collaboration framework with a common taxonomy and interconnexion of the databases.
  *   Government might consider that having another player would decrease their own national revenues. We need to remember that there are already several cases where this happen : VAT for instance.
     *   I know this is a tiny portion of international commerce but I take it as an illustration. The general public buying goods abroad can be reimbursed of the VAT they paid to the country they are leaving.
     *   Governements keep the taxes on the benefits made by the sales agent on their territory but they do not collect the VAT of purchases made on their territories.
     *   (The funny thing however is that those collaboration between the national customs agencies gave birth to international VAT reimbursement players who keep a share for their own administrative costs. And that is clearly detrimental to the final buyer)
  *   There are already intergovernmental collaboration with electronic data interchange (Interpol)...
  *   On the question of the amount of money to be collected, this is clearly something that should be decided by the Nations representatives... and the implementation would be then on the agency agenda...

Regarding your analyses that  "in the long run it will prove impossible to tax the sale of IP", I have mixed feelings. I think that IP rights will be reconsidered thoroughly and that if Gutenberg and his press gave birth to IP, internet and hypertext will review drastically the notion of IP and the value of content.... and hitherto related taxes... But as long as content will have a price.. there will be taxes ;-)

Kind regards
Ph

On Jul 13, 2011, at 4:39 PM, Kerry Brown wrote:

I've been lurking here for a while. This is my first post. This discussion is very interesting and Phillippe's post in particular.

Phillippe:

Do you really think a UN style agency that collects taxes and disperses the money collected to hundreds of thousands of competing jurisdictions could work? The same questions will still apply and we will have another layer of bureaucracy to deal with.

First - How much of the money collected would simply go to the bureaucracy that would be created to administer this?

Second - This would not solve the problem of each jurisdiction having different rules about what is taxed and what the tax rate is.

Third - How would the agency determine who gets what portion of the money collected? There may be national, provincial, municipal, and other claims to the tax collected.  There would be claims to the money from the jurisdictions where the vendor is located, where the goods are located (i.e. data center where the actual bits are located), where the bits physically end up, and where the buyer is located. You could potentially have a dozen or more jurisdictions claiming a portion of the money. How would you calculate the tax at the time of the transaction? Is each jurisdiction additive?

The level of bureaucracy needed to administer this would cost more than the taxes collected. I think an agency like this would make the problem worse than it is now. I believe that in the long run it will prove impossible to tax the sale of IP. There will be competition between jurisdictions to get the tax revenue, either on their own or through the proposed agency. Some jurisdictions will make it advantageous to register or virtually locate the sale in their jurisdiction. This will drive the tax revenue down to a point where it is unprofitable for most jurisdictions to collect it. At that point they will want to revisit the paradigm. We will be right back where we are now. Jurisdictions that try to tax the sale of IP need to find other sources of tax revenue. The product is too ephemeral to successfully tax.

If the sale is of physical goods then the existing tax system should work fine.

Kerry Brown

-----Original Message-----
From: governance at lists.cpsr.org<mailto:governance at lists.cpsr.org> [mailto:governance at lists.cpsr.org] On
Behalf Of Philippe Blanchard
Sent: July-13-11 6:12 AM
To: governance at lists.cpsr.org<mailto:governance at lists.cpsr.org>; Daniel Kalchev
Subject: Re: [governance] FW: TP: city government exercising policy on
Google Applications / consumer rights / Consumer Protection Act / trial
period

I follow-up Daniel's analysis.
In his example, he clearly demonstrates that we are in a situation for which
the classical rules based on physical territory cannot apply. Eventhough those
rules proved useful, they were designed more than 200 years ago
(Beaumarchais- 24 January 1732 - 18 May 1799-  worked on Intellectual
property consideration and set the basis of main of our current IP laws).

We all know that those rules cannot longer apply as is and the question is
then  to review what is the scope that can embrace the fact we are moving,
we buy "stuff " in one country to be used in another country... and when
those "stuff" are intangibles, their materiality (or lack of) clearly conflicts with
the classical, material rules we used to abide by.

I am afraid we cannot go further if we still try to cut&paste rules that were
designed hundreds of years ago to the world we now live in. Internet
governance and intangibles taxation require the creation (or the
mobiilization) of a meta-structure, above the national levels... And for me, it
needs to be a UN-type agency.

Philippe

On Jul 13, 2011, at 2:53 PM, Daniel Kalchev wrote:

Interesting discussion indeed.

What is an application? What you pay for, when you buy software? Aren't
you paying for the right to use the application? How are taxes collected on
rights to use? Who is taxed -- the party that gives the right, or the party that
receives the right?

Does the application have physical location? Does it reside on my iPad flash
storage and if it does, can I take it from there and put it in another physical
place? Or does it reside "somewhere" in the Internet cloud?

What if the application is web based, "resides" and "runs" somewhere, but I
"use" it here?

Could you also explain to me who collects taxes when:

Apple in California sold me the application.
I purchased it while in Oslo (Norvay), then used it while staying at the
Frankfurt (Germany) airport and continued to use it back home in Varna
(Bulgaria).

Internet does not have 'place' and it also does not do anything with 'physical'
objects. Both these things are the foundation of the current taxation system.

Daniel
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