Senator Kerry: Online taxes, privacy changes coming

Creating a fair playing field for both online and off-line businesses will require some level of Internet taxation and the ability by online companies to gather personal user data for advertising purposes, Sen. John F. Kerry (D-Mass.) said today.

To help Web business survive and thrive, Kerry said he plans to push for a national "opt-out" privacy policy for all Web-based transactions except those involving financial data and medical information.

Kerry said he plans to reintroduce a bill he cosponsored with Sens. John McCain (R-Ariz.) and Barbara Boxer (D-Calif.) that would allow Web-based businesses to gather personal information on Internet users for advertising purposes.

"What many Americans don't realize is that in the off-line world, they have already lost most of their privacy," Kerry said during a breakfast meeting of the Massachusetts Software & Internet Council Inc. Friday morning. "If privacy is a right, and several Supreme Court cases suggest that it is to an extent, then we have to make certain that the off-line world and the online world are thinking about privacy in the same context."

Brick-and-mortar retailers that now use direct mail advertising and other methods to reach customers have already invaded the privacy of most Americans, Kerry said. That leaves online businesses at a disadvantage if they can't collect information about their customers' buying habits.

"We shouldn't take it as far as DoubleClick did," Kerry said, referring to secret data collection practices by the online advertising company that drew fire from privacy advocates last year (see story). But forcing online businesses to live under "opt-in" rules, where information can be collected only after users actively provide it, would give traditional businesses an unfair edge.

Kerry later told reporters that "for commercial transactions, opt-in is more cumbersome" and would hurt competition by online businesses. Forcing online companies to follow such a policy just to stop the cyberequivalent of junk mail, when similar rules aren't enforced in the brick-and-mortar world, would be unfair.

The senator did say he would exclude financial data and medical information from the law, meaning collection of that information would be barred unless users gave prior permission. Such data gathering practices would be subject to a "tougher standard," with the Federal Trade Commission responsible for enforcing the rules. All companies would have to post a clear and understandable privacy policy on the first page of their Web site.

Regarding online taxation, Kerry told the standing-room-only crowd that he expects online transactions to eventually be taxed. He didn't know what form the tax would take but said it would have to be a system endorsed by all 50 states.

He prefaced his prediction by noting he's an original supporter of the current moratorium on Internet taxes.

Kerry said online taxes will be needed because too many local governments are being hurt by lost revenues while too many brick-and-mortar companies face an unfair advantage from online businesses.

Also speaking at the meeting were Bob Davis, former CEO of Lycos Inc., and Ellen Hancock, CEO and president of Exodus Communications Inc.

In her address, Hancock blasted the state of California for having ignored signs of a worsening energy crisis. But she said Exodus has no plans to close any of its facilities there. "We absolutely intend to stay in California," she said.

Davis, now a venture capitalist, told the audience to stop thinking of the Internet as an industry unto itself and begin seeing individual companies in terms of their own merits and drawbacks. He called this a great time to be a venture capitalist because the old business tenet of "buy low, sell high" still applies.

This story, "Senator Kerry: Online taxes, privacy changes coming" was originally published by Computerworld.

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