My views on software, programming, Linux, the Internet, government, taxation, working, and life.

Monday, March 20, 2006

New Social Darwinism: Being "Internet-Stupid"

Check this link out that I saw tonight.

Some people still just don't understand the Internet. Notice in the link above about the comment from the lawyer for the Chicago housing group where he tries to compare publishing on the Internet to publishing in a newspaper, and says that USA's laws regarding equal opportunity in fair housing apply in both cases. (Note that I am not defending racism, which he discusses, which I find to be evil just he does. Instead, I am using this legal argument as an example on the concept of moderation of content.)

Many people still think that if someone posts something on a website, that its content should be moderated by the viewer's home-country laws. They do not understand the No-Geography concept when it comes to the Internet. About the only leg to stand on would be to have nexus laws regarding what country, state, or province the website is hosted in, and then enforce those by the local police getting a warrant and either shutting down the web hosting provider or telling it to shut that particular site down until this runs through the courts. However, if that were to ever seriously engage as a widespread practice, we'd all move our websites to countries with lax laws on this topic such as India. There goes all that Internet money going offshore again!

Meanwhile, again, this is the same argument that I find with taxation on the Internet, which I think is absurd. Many provincial governments think that they can enforce tax laws on the Internet and fix their problems, such as ask to cough up all the addresses of items shipped to California, cross-reference that against registered taxpayers, and then issue tax law legal summons to all those taxpayers. And if they did that, it would probably work only once. And why? Because the next year, those customers wouldn't go to, but would go to a site like (I made that up) where they would be beyond tax law jurisdiction. Again, there goes all that Internet money, offshore. You can hear the loud sucking sound already. (Not to knock India, particularly. I have a lot of praise for India and some of my websites are hosted there.)

When it comes to the sphere of the Internet, normal physics do not apply in many cases. If states and provinces really want to get serious about losing money to taxation losses, then they have a few options. Here's some creative suggestions:

* Have your state or province focus less on trying to recover lost tax revenue and more on business generation and incubation. There's plenty of money to be made there because every state knows that small businesses generate the highest portion of tax revenue for a state even over large businesses located in that state. And while you're in the incubation game, why not pass along good tax law education to these businesses too?

* Reduce legal barriers in your state or province and make it Internet-friendly. You'll find businesses will swoop to be hosted there and you can collect sales taxes for all citizens who live in the same state as the nexus of the business. You'll also find that the web hosting providers will have various standard taxes that your state's revenue department can utilize like they normally can with any other business.

* Ask Congress to increase import tariffs and deliver a percentage of that in fees to the states or provinces for lost revenues. (But this sounds a little like Communism to me. Doesn't it to you?)

* Ask Congress to create a federal shipping tax to be applied on packages shipped via any package carrier and have a percentage of that be delivered to the states. (Isn't that what the Canadians do with the VAT? I thought so.)

* Set up your own deals on the Internet and profit from it. For instance, a state could build a supersite and every 2 years they could put out an RFP for 15 qualifying businesses in that state to be chosen to be promoted in that state. Then, provide other services on that site that would actually inspire people to want to send their eyeballs there, such as a family-friendly news and games area, or a portal for the local newspapers or TV. Think about, for instance. They put a tool on every Firefox browser so that if you search on Google, and then purchase something from a company hosted on Google adsense, this is tracked and money ships from Google back to And by doing that, the other day it was revealed that has earned $23 million dollars (and that's probably double by now as we speak!). Similarly, states could jump on board the Internet and provide portals for its citizens where the state gets a cut of the profits just like any portal might get a cut of profits for the advertising and link connections.

* Using a standard RFP process and being fair with competitive bids renewed every so many years, have your state build its own competing ecommerce engine that could be optionally used by businesses in that state. Of course it would have to be fast, affordable (in scales), and rock solid for it to take off. A state could also make their engine more attractive to companies by offering, in certain cases, tax revenue protection. I mean, if the state's revenue department has a hand in the site's design, then more than likely it will comply with applicable laws and the state can defend itself on those laws because it knows them better than anyone else. In fact, it might even help tweak those laws to iron out potentially Internet-unfriendly kinks.

These are just a sampling of ideas. Many more can be thought up by think tanks.

Essentially, in my country, just like yours, the old tax laws worked because the physics of space (geography) existed. Before the Internet arrived, business had to collect sales taxes from you because governments knew that it was too inconvenient for you to jump across the border into another state or province to purchase something. But with the Internet, you can jump across one state, two states, a gazillion states, or completely on the other side of the Earth with a single click, type in your credit card, and within one week have something sent to your home.

And the same goes for content. The concept of geography does not apply. Just because citizens can view content in their state from wherever it is hosted does not mean that this state has legal jurisdiction against such a business. And if a state says, "Oh well, we'll just require our ISPs to put filters on such web addresses," that would amount to living in a Communist State like China or North Korea. That would fly only for about 4 months and then there would be a huge customer uproar. And if states wish to attack a business by hosting provider or business nexus, you'd hear a loud sucking sound the following year as those things moved offshore. That trick only works once.

If State or Province assemblymen and Federal congressmen and parliamentarians do not watch themselves, they could get voted out of office simply for being Internet-stupid.


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