Addressing Policy Issues of Electronic Commerce: Taxation, Privacy, Fraud Protection, And Restricted Sales

The laws governing commerce were established when buyer and seller met face to face. In Electronic commerce, goods and services are exchanged across a communications network, raising difficult new problems with respect to taxation, privacy, fraud protection, and restricted sales (such as pornography to minors, or weapons to criminals). Limitations of today’s electronic commerce infrastructure force policy-makers to balance competing objectives. For example, do we undermine an accepted policy objective, or hobble the growth of electronic commerce? The controversies in these four critical areas share a common origin. When other parties involved in a transaction are remote, it is difficult to obtain trustworthy information about the transaction, and to create a verifiable record. This paper discusses these controversies in detail. It then proposes steps that policymakers and industry could take to address the underlying problems in our electronic commerce infrastructure, thereby reducing or eliminating many of these policy dilemmas. Section 1: Introduction Electronic commerce, which is the commercial exchange of products, services, and information over a telecommunications network, is becoming a viable alternative to traditional face-to-face transactions. Over 30 billion dollars of products were sold via electronic commerce in 1998. Forrester Research estimates that these sales will double every year, reaching roughly 250 billion dollars in 2001, which is comparable to the US auto and telecommunications industries. By 2003, annual electronic commerce sales are projected to reach 1.3 trillion dollars. Transactions without payments are also lucrative. Jupiter Communications estimates that by 2003, the Internet will by vying with radio for the third biggest medium for advertising behind newspapers and broadcast television; that means the Internet will soon surpass magazines and cable television. On-line banking and brokerage are becoming the norm. There were 4.3 billion dollars worth of on-line securities trades in 1998, and this figure is expected to reach 1.3 trillion dollars in 2003. Policies made today regarding such electronic commerce practices will probably remain in place as these practices become an increasingly important aspect of the world's economy and information infrastructure.