Buying Online: Taxing problem of Net buying

"ONLINE COMMERCE will not work without regulation," says Daniel Bieler, Internet consultant at analysts Ovum.

Regulation is needed to make contracts binding. "If you have a server [internet computer] in one country, buy goods in another and live in a third where is that transaction taking place? Also copyright protection is very important."

All these matters are being discussed at the EU, in Washington and in world trade bodies but little has been agreed. Battles are raging between different parties. The EU, for example, is threatening to prevent European citizens doing business with US companies as it says data protection legislation in the US is not tight enough.

But the biggest bugbear is likely to be tax.

"Many of the transactions on the internet are essentially tax free for the moment," says Mr. Bieler. "But once electronic commerce really takes off, governments know they will no longer be able to ignore it." With a huge pot of money crossing international borders, ownership of these transactions are vital.

Goods bought over the Internet are protected first by general consumer protection legislation (if any) and second by any additional guarantees offered by the Internet shop or the manufacturer. A UK customer who buys goods from a UK Web site will be treated by the law in the same way as if the customer had bought by mail or telephone order with all the statutory protections and manufacturers guarantees.