Taxing Net transactions disastrous: Jerry Rao, Economic Times, Dec 14, 2001

NY decision to tax Net transactions could be disastrous, according to Jaithirth Rao, chairman and chief executive officer of MphasiS BFL.

Delivering the keynote address at the 29th annual convention of the Institute of Company Secretaries of India here on Thursday, he said, that even the US Congress had decided against levying taxes on transactions made on the internet.

"All indications are that internet transactions could be the goose which lays the golden eggs and it may not be a rational thing to tax these transactions," he added.

Interestingly enough, estimates indicate that even specialised transactions like internet-based recruiting could be worth over $1 billion in the next four to five years.

Referring to corporate governance, he said, that companies can look at self-regulation instead of merely having to rely on compulsory regulation.

However, on the flipside, companies may have to adhere to the systems and procedures built under a self-regulatory mechanism which in turn would increase the level of accountability, he added.

"A best governed country or corporate is one which has minimum regulation. Increased amount of regulation does not work," he added. Recounting the growth of phone banking in the US in the early 70s, Mr Rao added, that there had been intense debate if such a move needed special legislations.

However, when the facility was subsequently introduced, it was found that the existing legislation was sufficient.

On hindsight, with the experience in the tele-banking arena, it would only be a matter of time before the validity of transactions on the net would become equally acceptable.

On the September 11 attacks, Rao said, that disaster recovery and recreating data gained importance among companies.