THEY'VE been smiling in Massachusetts this month, and with reason. Thanks to a forward-thinking governor, Internet users will now be entitled to a direct rebate or credit for any taxes they have paid for Internet and email access, Web hosting and electronic bulletin boards, all the way back to 1990 - the move will return a whopping $8 million to citizens.
As Ireland's Information Society Commission finally lumbers into action, charged with develop- ing a strategy to bring Ireland into the information age, what are the chances citizens here will be excused from the 21 per cent VAT levied on Internet access?
According to the commission's secretariat, all proposals in the information society steering committee's initial report (http://www.forfas.ie/infosoc) will be considered, including "fiscal incentives" to encourage homes and businesses to adopt advanced technologies. The commission will be making its recommendations in consultation with the Department of Finance - although so far, the Department's only reaction to the question of VAT-free Internet access has been a terse no-can-do.
"The government aren't considering making Internet access VAT-free because we can't," a Department of Finance spokesman says. "The position is that this is ruled by an EU directive, which states that the VAT has to be levied at that particular rate."
Internet service providers who focus on the consumer market, meanwhile, are obviously eager for incentives to bring more Irish customers online. Although VAT for an Internet account is only about £20 a year, users also pay VAT on telephone calls to connect to the Internet, on the computer itself, on the modem, on the software. . . the list is discouragingly long.
"Even if users could put that £20 against the cost of a modem, it drops the barriers to entry for people who may be shying away from the Internet because they believe it to be expensive to use," says Colm Grealy, general manager for Internet service provider Ireland On-Line.
It is also "ironic", he says, that foreign Internet service providers may do business in Ireland without charging VAT. A CompuServe sales representative in Britain cheerfully told us that a CompuServe account in Ireland would cost just £6.50 a month, plus £1.95 an hour after five hours online. There would be no VAT, he said, "because we are an American company".
It's disparities like these that are distressing Irish Internet companies who are trying to lure a critical mass of Irish users online. "Really what the Government should try to do is encourage and motivate people by making Internet access as cheap as possible, not as expensive as possible," says Stuart Fogarty, founder of Internet service provider Club Internet. "It's a disincentive to Ireland to become technologically advanced."
Both Fogarty and Grealy say they haven't been contacted by the new Information Society Commission, although they and other Internet and business organisations suggested a range of fiscal incentives to encourage Internet uptake:
eliminating or reducing VAT on goods bought through online Irish merchants;
tax breaks for parents to bring more children online;
tax rebates for the purchase of Internet-ready computers;
grant aid to enable companies to develop world- class Web sites; and
the channeling of existing VAT on Internet access into awareness-raising initiatives.
Whatever is decided, Grealy says, the stakes are high. "Many international call centres and businesses operating here are looking for Internet skills among the people they employ," he said. "If Ireland can't supply people to those companies, perhaps those companies may look elsewhere." The Information Society Commission, whose report to the Government is expected by the end of the year, is at infosoccomm@taoiseach.irlgov.ie
Sheila McDonald is at: smcdonal@iol.ie.