Information Policy and the Law: On Taxing the Internet and Government's E-Rulemaking

Continuing the discussion on policy issues, an article on whether to tax the Internet became the primary point of discussion as the same question was asked to the class. It must be noted first that the question and the article itself talks about taxing the Internet access, usage and online sales, not the Internet perse.

In the US, some states have already started collecting access and sales taxes for transactions done online. An access tax is a tax fee a customer pays an ISP such as America Online. Sales taxes, on the other hand, are an e-commerce tax that would require the vendor to collect a sales tax when someone purchases something over the Internet. Other proposals in taxation scheme to be included in the “Internet tax” are use tax, delivery tax, etc. Although the US Congress had imposed a moratorium on new access taxes, several states had the taxes in place before Congress acted on the moratorium.

Going back to the question on whether to tax the Internet access and usage it would be appropriate to consider if these US laws and regulations can be applied in the country. In the US federal system, states can independently impose taxes on their own borders. Thus, they differ significantly in their approaches to taxes and the government considers that difference a good thing. To them competition between states mean that an American citizen who is unhappy with the policies of one state could move to another. For instance, some states allow Internet taxes to be collected if this would benefit its population. A citizen who does not want to pay a sales tax in his or her online transaction can choose to move the transaction to another state which does not implement a sales tax on online purchases. Thus, as the states experiments with different policies it would be able to determine what is appropriate and acceptable to its population.

However, in the Philippines the government implements a uniform set of rules in taxation on most basic commodities, products and services. Competitions among provinces or regions are merely in terms of progress in the government’s effort to collect tax efficiently. But the “payback” of the tax collected in terms of infrastructure, peace and order, basic services, etc. are basically the same in all provinces. The government has yet to come up with policies regarding Internet taxation. Even the drafted information and communications technology roadmap of the country do not have a provision that discusses Internet access and usage taxation. Should it choose to collect Internet taxes, it must first formulate a policy regarding Internet access and usage, and more importantly specify its intention in doing so.

Moreover, the country is on the verge of aggressively developing its ICT program as it competes with its neighboring Asian countries in information and communications technology. The government actually encourages individuals, companies, and even its offices, to use the Internet to hasten the delivery of government services. It would be detrimental to the program’s success if it decides to tax the primary medium towards its progress.

In relation to ICT, the article on “New Directions for Digital Government Research” became the second point of discussion. It talks about the role of information technology in improving processes by which government makes regulatory decisions. Workers on regulatory issues increasingly recognized the potential benefits from new applications of IT in rulemaking process. As an example, the e-Government Act of 2002 of the Bush administration directs regulatory agencies to deploy technology to enhance public participation in government decision-making.

Putting it in the Philippine context, one may question as to whether the government is really serious in as much as public consultations on issues affecting its people is concerned. It has been observed that in most cases public opinions and ideas which should have been captured in public consultations are seldom translated into public policies due to some political interests of the government. Thus, some laws being enacted lack or miss to address the real issues.

Another point of concern is the government’s seriousness in its policy implementation. Or rather, it is because that there was inadequate exerted effort on the policy formulation of the issues at hand in the first place. An example was raised during the class as to the government’s pronouncement to increase power capacity of hydro-electric plants in Luzon by twice as much of its current capacity. The Department of Energy is tasked to deliver the goods but the agency can only do much because there is no clear understanding on how it should be carried out. Hydro-electric plants take years to be built and it involves enormous funding in which the government has also no clear provision on how and where to source it.

The information and communications technology program of the government is supposed to address the gap in the traditional way the government is conducting its public consultations. However, government efforts to fully exploit the use of ICT as a tool to improve access to and delivery of government services must be supported by policies on e-Governance. A comprehensive policy on ICT will outline how the government would manage, procure and use information technologies to more efficiently deliver services. Some of the key policy issues to address shall include data sharing among government agencies, interoperability of government systems, data privacy in government.

MIPOLAW Class 2006

Information Policy and the Law: Defining Policy

Policy is essential for every organization for it lays down the guiding principles that govern its rules and regulations for the overall achievement of its goals and objectives.

Policy analysis helps to alleviate problems arising from scarcity. Seven stages or cycles are involved in its development: intelligence, promotion, prescription, invocation, application/implementation, appraisal and termination/amendment. Intelligence concerns with defining the problem and analyses of the issues at hand. It also lays out alternatives and forecasts the consequences of actions to be considered. Modeling plays an important role in this stage for it represents a scenario to the policy analyst in making a policy recommendation. Nonessential that cloud the problem must be strip away in order to expose the structural relationships among variables so that consequences of a particular policy choice may be predicted. After defining the problem and laying out the alternatives comes the promotion function where consultation among affected parties affected parties takes place. This is also the stage where data and information gathering fits in as the analyst comes into direct contact with the situation or the people concerned.

In defining policy it is important to make a distinction between similar terms as people tend to confuse policy with rules, regulations and even with laws. A policy is a body of principles to guide regulations, rules and actions as well as its implementations. It sets up boundaries around decisions including those that can be made and shutting out those that cannot. In this way it channels the thinking of the organizational members so that it is consistent with organization’s objectives.

Rules, on the other hand, are statements that a specific action must or must not be taken into a given situation. For instance, it is a hospital policy not to divulge any information about a patient’s identity and/or condition to any person with no direct relation or jurisdiction or authority to the patient. Thus, rules are set to carry out this policy, specifically stating that all patients’ information will be given in a need-to-know-who-wants-to-know basis, and that all related inquiries must be channeled through the top management.

There is also a difference between policy and law. Policy is both a mechanism use to implement laws and/or a guideline issued to solve a particular social problem. Some policies are translated into law although there are many policies that do not become laws. Policy is not always written down, although obviously, written policy is better because it offers guidelines.In relation to laws, policy is also often times think of as political in nature, something that has to do with the government. This is basically true because it is usually the government who decides what policies and laws are to be implemented. These policies, termed as public policy, are the course of action or inaction chosen by public authorities to address a problem and are usually expressed in the body of laws, regulations, decisions and actions of government.

Policy is important in as much as the government is concerned for it is used as a tool to efficiently utilize the finite resources of the State for the common good. In the light of this discussion came the article on US Telecommunication Act of 1996. The inevitable question of whether to amend the Act to include new technologies brought about by the emergence of the Internet as an alternative tool in communication. As presented, the Act failed to anticipate the direction of telecommunications development with the key unanticipated change was the degree to which new communications technology have become a major competition for the traditional phone services. New technologies like emails, instant messaging and voice over IP (voIP) soared high in terms of market penetration in recent years. Given the consumer response to these new technologies and applications that competed directly than regulators acknowledge, it is apparent that concerns about sufficient competition in communication as supposed to be provided in the Act were unwarranted.

In a similar fashion, the Philippines also has its share of telecommunications problem as the country is not spared in harnessing the benefits of these new technologies. For instance, the National Telecommunications Commission (NTC), mandated to carry out the provisions of RA7925, the Telecommunications Act of 1995 which lays down the foundation for the administration, conduct and direction of the telecommunications industry in the country, is in the process of issuing new rules to govern both business and public use of voIP. Public telecom entities (PTEs), according to NTC’s interpretation of the Act, are allowed to offer voIP to public. However, it is not convinced whether the Act allows non-PTEs such as cable companies and internet service providers (ISPs) to offer voIP to public. The legal issue is whether non-PTEs have to obtain a legislative franchise and secure a copy of Certicficate of Public Convenience and Necessity (CPCN) from NTC before they are allowed to provide telecommunication services such as voIP.

Major concern for both Acts is its lack of safety nets to safeguard new entrants to unfair competition. RA7925, for instance, has no explicit or forceful rules on access regulations. Instead it specifies that access charges and sharing arrangements between interconnecting carriers shall be negotiated between parties. In practice and theory, however, an incumbent (dominant player) is reluctant to give access to small players supplying the same product or service. If there is intense competition between telecoms interconnection agreements are less likely because of divergent interest.

Policy development entails looking at both sides of the interests of the affected parties and weighing which will be beneficial to the majority. In the case of telecommunications industry, it is clear that new technologies will dictate the state of competition in the future. Policies for future telecommunications legislation should consider the strong acceptance by the consumers of new and expanding forms of communication made available by the digital revolution.