A series of temporary bans on internet access taxes has been in place in the US since 1998, forbidding states to create any new taxes on internet connections for fear of stifling the growth of e-commerce. But this ongoing ban has been subject to criticism, particularly from budget-pressed Governors who would welcome additional tax income.
US debate on a proposed extension has been vigorous, with the House of Representatives passing a Bill in September that created a permanent ban. The White House has also indicated that it favours a permanent ban.
But opposition to such a ban has been stronger in the Senate where, until last week, there seemed to be deadlock. The difficulty related to broad wording in the Bill that could have been interpreted as extending the ban to phone services, pager services and other services likely to be available on the internet in the future.
Opponents of the ban said that to extend the moratorium to cover these additional technologies could cost as much as $9 billion a year in lost revenue by 2006.
But last week the Senate reached agreement on a compromise Bill that extended the moratorium for a further four years and ensured that the growing internet telephony industry – which looks likely to replace traditional, heavily-taxed telephone networks – is not covered by the ban.
According to Commerce Committee Chairman Senator John McCain:
"This bill will ensure that consumers will never have to pay a toll when they access the Information Highway. Plainly and simply, this is a pro-consumer, pro-innovation, and pro-technology bill. The internet has started to become a fixture and core component of modern American life that has created and continues to generate social and economic opportunities throughout the US. This was our goal then and it continues to be our goal today".
Negotiations will now take place between the Senate and the House of Representatives to see if the obvious differences between their respective Bills can be reconciled.
