- Slides: 36
Electronic Commerce COMP 2113 Week 4: Richard Henson 2008 Legal and Taxation Issues February
Week 4: Legal and Taxation Issues n Objectives: ØRecall the main items of UK/EU legislation relating to on-line trading ØExplain how particular laws have become issues for e-commerce ØApply relevant legislative principles to the construction of on-line trading websites
The Legal Framework n Global trading Ø Therefore International implications n Most important for e-commerce developers: Ø adapted UK laws Ø New UK/EU legislation Ø US legislation n Building a compliant site Ø customer rights Ø taxation aspects Ø trademarks n RIP and DP Acts re-visited
Legal issues in e-commerce n n n n Trust Security/encryption/digital signatures Data protection Contract law/email Rules on Jurisdiction Taxation Libel/defamation
Why the problems? n Nature of e-business Ø takes place… » in multiple locations » without borders n Whose laws apply? Ø goods ordered might cross national border between advertising and fulfillment n Balancing act: Ø providing the right environment for E-Commerce and also control n Impact on e-trade growth prospects in the UK?
Legal minefield! n Solutions? ØAdopted or adapted existing legislation » e. g. extensions to Consumer Credit Act » customers using online stores based in the UK have the same rights as when they shop in the high street n General advice sites on the legal aspects of the web and E-Commerce: ØOffice of Fair Trading www. oft. gov. uk ØNational Computer Centre www. ncc. co. uk
Regulations on E-Commerce n US Department of Commerce ”Memorandum of Co-operation” (1997) Ø general principle - keep regulation to a minimum Ø all changed after 9/11… n International conflicts of economic philosophy: Ø e. g. compare Amazon in US and UK » http: //www. amazon. com/privacy-notice » http: //www. amazon. co. uk/privacy-notice n UK: e-commerce regulated even before 9/11: Ø Regulation of Investigatory Powers (2000) Ø Electronic Communications Bill (2000)
Existing legislation & E-commerce n Agreed that existing UK legislation would still apply: ØTrade Descriptions Act 1968 » describe products and services correctly ØSales of Goods Act 1979/Sales and Supply of Goods Act 1994 ØTrade Marks Act 1994 ØUnfair Contract Terms Act 1977 » last three can be applied to web adverts…
Further Existing legislation Consumer Credit Act 1974 n Misrepresentation Act 1967 n Control of Misleading Advertisements Regulations 1988 n Defamation Act 1952 n Lotteries and Amusements Act 1976 n Obscene Publications Act 1959 n
UK Internet Laws n Electronic Communications Bill (received Royal assent on 25 th July 2000) Ø a framework for legal aspects of E-Commerce Ø electronic signatures the same status in law as hand-written signatures n Regulation of Investigatory Powers (RIP) Bill - passed by Parliament on 28 th July 2000 Ø contents encouraged by the police and National Criminal Intelligence Service (NCIS) Ø Part 3 highly controversial
EU Legislation, 2000 Less restrictive than UK legislation n Covers: n Ødistance selling Øcopyright Øjurisdiction Øcontract formation n Also United Nations body UNCITRAL provided an early model for a Law on Electronic Commerce
US Internet Tax policy n “The Administration supports: ” Øa permanent ban on taxes on Internet access & no customs duties on electronic transmissions Øa continuation of the moratorium on multiple and discriminatory taxes Øinternational tax rules that are neutral, nondiscriminatory, simple and certain Øsimplification of state and local sales taxes and telecommunications taxes
US Legislation n Applies to all businesses trading with US customers: ØUS Dept of Transport fined Virgin Atlantic for misleading prices on its web site Øtraders MUST to study the legislation carefully or risk getting caught out! n Raft of post-911 legislation: Ønotably the US Patriot Act (2001)
EU E-Commerce Directive (2000) n Introduced to clarify and harmonise the rules of on-line business throughout Europe Ø aim - boosting consumer confidence in online trading Ø applies to all Member States of the European Economic Area (EU plus Iceland, Norway, Liechtennstein) n UK missed the deadline by more than 8 months…
UK: Electronic Commerce (EC Directive) Regulations 2002 n Refers to an "information society service. “ Ø defined as "any service normally provided for remuneration at a distance, by means of electronic equipment for the processing (including digital compression) and storage of data, at the individual request of a recipient of the service. " n Covers: Ø every commercial website Ø those offering online information or commercial communications (e. g. adverts) or providing tools for search, access and retrieval of data
E-Commerce and tax laws n If I buy on-line I don’t have any interest in where the goods are coming from… Ø but what about local/import/ VAT taxes n A responsible vendor should resolve taxation issues through the website Ø shopping cart should automatically deal with such issues when creating the online invoice n Buyer should be advised at the time of placing the order what, if any, extra charges involved… NOT held to ransom e. g. by the delivery driver when the goods arrive… Ø customer now protected by EU legislation
E-Commerce and tax laws n The EU has always supported free trade Ø argument that Internet purchases should therefore be tax free… Ø this cuts across existing legislation » Local TAXes? » VAT? » Import duty? n As a minimum, the vendor should itemise Import duties and VAT on the invoice Ø buyers therefore aware of charges incurred
Tax - a level playing field? n Tax loophole in EU/USA trade Øallowed US companies in the early days to sell online goods to EU customers tax-free ØEU customers could therefore buy goods from the US and not pay VAT… ØImport duty could only be collected if parcel clearly marked with contents » though could be opened by Customs & Excise
Tax - a level playing field? Loophole closed by EU legislature n US firms which want to sell to Europe now have to register in an EU member state and pay VAT at the local rate n Øannoyed US companies and lawmakers alike Øespecially as different VAT rates operate in different EU countries
Existing EU tax policy All have a local VAT rate… n BIG variations between states: n Øe. g. UK - 17. 5% ØDenmark - 25% n Single registration and harmonisation of VAT rate proposed Øfor e-commerce only? Øthey’ll be lucky…
Tax - a level playing field? n European E-business Tax Group Ø set up in 1999 n n Companies involved: Cisco, Compaq, EDS, IBM and Microsoft Purpose: Ø to develop proposals on taxing e-commerce transactions between US, EU, and the International Community Ø by 2008… still hasn’t happened!
Less Controversial Solution n A look up database/single site maintained by the tax and excise authorities Ø E-Commerce providers link up to it Ø conversion factors allow the total value of the duty for that country to be easily calculated Ø duty then added to invoice making the purchaser aware of EXACTLY what charges will be levied before making the purchase Ø required International co-operation between competitors, but it eventually happened
Building a compliant E-Site n UK law - anyone selling online must meet certain minimum requirements: Øa name and full address Øa full description of the goods for sale ØPrice (including VAT and delivery) Øpayment and delivery arrangements Øinformation about returning goods Øperiod of the offer
Building a compliant E-Site n Customers Rights: Ø customers can return the goods within seven working days of receipt Ø written confirmation of on-line purchasing rights must be received by the customer (email is ok) BEFORE they agree to buy the goods n Advertising and marketing on web sites: Ø The Internet Advertising Bureau » a member of The Committee of Advertising Practice » Voluntary codes of practice created by this body
Building a compliant E-Site n An e-commerce site should also provide details of: Øany conditions for the right of withdrawal Øafter-sales service/guarantee Øcancellation conditions if the contract period is: » unspecified ØOR » longer than one year
Use of Trade Marks on Websites n Businesses should get written consent first … Ø generally OK to use a logo as long as it does not suggest some sort of commercial relationship Ø but if use can be regarded as misleading or possible denigration of brand, the website owner could legitimately be sued n What is legal and not legal is a difficult issue for marketing people… Ø www. marketinglaw. co. uk
Regulation of Investigatory Powers (RIP) Act n UK was trailblazing in this area, back in 2000 but part 3 received lots of criticism! Østart of the “surveillance society”? n Lawyers argued that aspects controlling the encryption of data could breach the European Human Rights Convention (EHRC)…
RIP, individuals, and E-commerce n The legislation does provide protection for individuals against having their emails read by people Ø other than by government officials… n HUGE stir at the time! Mostly historical links about negative aspects of RIP Ø www. fipr. org/sfs 2000/ Ø http: //www. cs. man. ac. uk/~chl/scenarios. html Ø http: //www. fipr. org/rip/RIPGAKGB. pdf
Big Fuss about RIP part 3 included IT professionals n n All senders of encrypted data need to make their private keys available to law enforcers! Implied that everyone is a potential criminal Ø “nation of suspects not citizens” n n Failure to decrypt mail when requested to by government agents became a criminal offence unless the suspect can prove that they don’t have the encryption key The innocent party would then have to prove that they don’t have a key to decrypt this message - How could they do this? Ø see Cyber-Rights and Cyber-Liberties UK
Issues related to RIP part 3 n This is a reversal of the presumption of “innocent until proved guilty” Ø contravenes the EHRC & ancient British Law Research done by Foundation for Information Policy Research Ø Civil Rights campaigners claim Act could lead to false prosecutions if a suspect were to receive an unsolicited message n n Despite objections, laws passed… Sections relevant to E-Commerce (disclosure of private encryption keys) can be found at: » http: //www. homeoffice. gov. uk/oicd/ripbill. htm » http: //www. parliament. the-stationeryoffice. co. uk/pa/cm 199900/cmbills/064/00064 -j. htm#46
Breach of RIP; no prosecution n n No test case emerged… UUNet (a ISP) fell foul of the RIP law (not part 3) early in 2001, when it dealt with a spam attack Ø engineers clearing more than two million emails called up all the messages and examined the headers to delete the spam Ø no prosecution; no-one launched a complaint n After 9/11, part 3 quoted by the Home Secretary as a safeguard against terrorism Ø worry among civil liberties groups that “suspicion of terrorism” could be used unfairly when government were seeking the private keys of emailing individuals… Ø still no “test case” to present day…
The 1984 Data Protection Act Intended to protect the UK public n All organisations holding personal data had to register n Ønot doing so was (is) a criminal offence n Organisations that did register had to comply with 8 principles Ønot doing so was a civil offence Øthe individual had to take the matter to court
The 1998 Data Protection Act n An extension of the 1984 Act ØAlso has eight principles n Includes manual (paper-based) data as well as computer-based records Øexemptions for computer-based data until October 2001 (deadline now passed!) Øexemptions for paper-based data until 2007!
Data Protection n n “Safe harbour” agreed between US and EU Personal information sent to the US: Ø Firstly: needs the approval of the sender Ø secondly: agreement that it will be protected in the US n This is a voluntary code Ø so does it work? n All a bit of a mess Ø IF EU data is “safe”… Ø what about countries outside the EU communicating personal data with the US?
DIY Data Protection n Recommended course of action for Businesses: Øregister under the Data Protection Act Øimplement the code of conduct on privacy produced by the International Commerce Exchange Øinclude a privacy statement on the site » see Trust-e for further guidance
Further Reading n n Course text Out-Law website: Ø http: //www. out-law. com/page-351 Next Week ØE-marketing…. .