November 22, 1996 5:45 AM PST

Clinton to push e-commerce

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The Clinton administration plans to outline a broad initiative by year's end to encourage commercial activity on the Internet, presenting it as a centerpiece for the second term, CNET has learned.

This week's 50-page report on tax issues for Internet commerce by the Treasury Department foreshadows the White House's broader effort to outline a program designed to link two recurrent themes of the Clinton presidency: economic development and technology.

"It is our sincere hope that regulation can be used to ensure a competitive environment," a White House official familiar with the discussions told CNET. "We won't over-regulate."

The White House was quick to endorse the Treasury's position on taxing Net businesses as consistent with its own initiative, which is being coordinated by a newly formed task force on the issue.

"It represents well the market-oriented, nonregulatory approach that we have been advocating in the interagency working group on electronic commerce," the White House source said.

The task force is chaired by Ira Magaziner, who led the administration's unsuccessful effort to revamp the nation's health care system in Clinton's first term. It includes representatives of the Treasury, Commerce, and State departments, as well as the National Security Council, the National Economic Council, the Office of the U.S. Trade Representative, and the Federal Communications Commission.

The White House-led task force on e-commerce hopes to head off the possibility that, without a formal administration policy, other levels of government will step in to draw revenue from Internet businesses by, for example, levying new taxes on electronic commerce.

Formed seven months ago, the interagency task force plans to address nine areas: customs and taxation; electronic payment systems; security and encryption; privacy; commercial law for Net commerce; technical standards; informational content; and telecommunications, infrastructure, and interoperability.

The group intends to address commercial aspects of those issues, but any discussion of privacy or content will almost certainly open the door to broader policy debate.

The initiative is also being formed as the Clinton administration addresses controversy over the cryptography policy it implemented last week, a policy that could have a profound impact on American companies' ability to export their e-commerce technology and to make international transactions online.

While the online community has vehemently opposed Clinton's proposal of a key recovery system to keep records on all encryption keys for use in criminal investigations, industry leaders were relieved yesterday that the Treasury Department opposed the imposition of new taxes on e-commerce vendors.

The Treasury position paper on tax issues follows the department's September conference on electronic money, where major policy statements were presented by Treasury Secretary Robert Rubin; Currency Comptroller Eugene A. Ludwig; Alan Greenspan, chairman of the Federal Reserve Board; Robert Pitofsky, chairman of the Federal Trade Commission; and John Reed, chairman of Citicorp bank.

At that event, Rubin announced a separate task force involving the Federal Reserve, FTC, the Treasury, and the Federal Deposit Insurance Corporation to address the single subject of electronic payments.

Concerned that other governmental action, both domestic and international, might chill the Internet's development as a global marketplace, the White House task force also has its eye on the international stage.

"The Internet is a global medium, and we want to foster electronic commerce across borders," said the White House source, adding that the Clinton administration wants to work through international forums like the Organization for Economic Cooperation and Development. The encryption policy also created a new position of cryptography envoy, a sort of ambassador who will promote the U.S. policy abroad.

Rubin has also said the administration is working on international aspects of electronic money with other major industrial nations in the G-7 to present to a June conference in Denver.

"We think that by tackling some of the global issues, it will lend clarity to other discussions," the White House official said. "We are trying to lend coherence to how those different initiatives come together in the sphere of electronic commerce." In particular, it could help stave off state and local Internet taxes.

None of this, however, will stop U.S. states and localities from exploring taxes on Internet service providers and on sales over the Net, an idea that industry groups representing ISPs, such as the Interactive Services Association and Association of Online Professionals, are stoutly resisting.

 

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