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TALLINN, Estonia, May 24 — When Estonian authorities began removing a bronze statue of a World War II-era Soviet soldier from a park in this bustling Baltic seaport last month, they expected violent street protests by Estonians of Russian descent.

They also knew from experience that “if there are fights on the street, there are going to be fights on the Internet,” said Hillar Aarelaid, the director of Estonia’s Computer Emergency Response Team. After all, for people here the Internet is almost as vital as running water; it is used routinely to vote, file their taxes, and, with their cellphones, to shop or pay for parking.

What followed was what some here describe as the first war in cyberspace, a monthlong campaign that has forced Estonian authorities to defend their pint-size Baltic nation from a data flood that they say was set off by orders from Russia or ethnic Russian sources in retaliation for the removal of the statue.

The Estonians assert that an Internet address involved in the attacks belonged to an official who works in the administration of Russia’s president, Vladimir V. Putin.

The Russian government has denied any involvement in the attacks, which came close to shutting down the country’s digital infrastructure, clogging the Web sites of the president, the prime minister, Parliament and other government agencies, staggering Estonia’s biggest bank and overwhelming the sites of several daily newspapers.

Details emerge on IRS plans to tax eBay auctions

2007-05-17T01:09:53Z

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The IRS has made no secret of the fact that it wants Internet auction companies like eBay to provide more information about high-volume sellers to the government in order to help close the "tax gap" between what Americans owe and what they pay. But now the official proposals are finally on the table, and Ars has had a look at the documents. Here's what you can expect if the changes go through.

Changes are contained in the President's 2008 budget proposal. Instead of targeting only Internet auction sites, the current proposal actually expands the definition of a "broker" to include middlemen that don't actually function as the customer's agent in a transaction—like eBay, for instance. Brokers currently need to file a form with the IRS that gives the name, address, and gross proceeds of each customer they work for; under the new proposal, many more companies would need to do the reporting.

The Treasury Department wants the change because, as the budget request notes, "compliance increases significantly for amounts that a third party reports to the IRS." But this isn't a change that will apply to all eBay sellers; in fact, most will be exempt from the new reporting requirements.

Internet auction sites will only be required to report customer revenue information if the customer does more than 100 separate transactions in a fiscal year and generates more than $5,000 in gross proceeds. In a report from the Information Reporting Program Advisory Committee (part of the IRS), the new proposal is supported by a 2005 study showing that over 700,000 Americans have a primary or secondary source of income through eBay. Essentially, these people are running small businesses, but IRS research on small business tax returns shows that "non-farm sole proprietors under-report 57 percent of business income on Schedule C" (if you're a non-American who has never experienced the wonders of "Schedule C," count yourself lucky).

IRPAC dryly notes that "initial resistance should be expected" but tries to pitch the new plan as a benefit to consumers. The idea is that sellers who claim to be in the US can at least be verified as a US resident because the auction sites will need to secure additional information from US users at sign-up. According to the report, "customers of the auction sites would then gain greater comfort in that the item they are about to purchase actually comes from the country mentioned in the listing."

Data source: IRS

The IRS expects that the proposal, if it goes through, will bring in $20 million in 2008, the first year it would be in effect. By 2012, revenue from the change should rise to $220 million.
Criticisms

But trying to close the tax gap in this way has its share of critics, among them the Center for Democracy & Technology, which earlier this month laid out its concerns about the proposal. The group is not objecting to the IRS attempt to have small businesses pay taxes on their earnings; what does worry them is that the proposal will become a data retention nightmare and cost businesses a substantial amount of time and money for which they will not be compensated.

One of the worries is that Social Security numbers may need to be collected by every site that allows for small storefronts (like Amazon and eBay) or online auctions. Because these companies won't know until the end of the year which sellers have exceeded the reporting threshold, they will need to collect the necessary information from all sellers—and that means a lot more companies simply have databases of Social Security numbers, names, and addresses.

"While the IRS needs SSNs for tax purposes," says the CDT analysis, "and private sector tax reporting is partly what the number was created for, this proposal essentially requires Internet commerce companies to collect and store the SSNs of millions of people, most of whom will never even meet the requirements for reporting their auction income to the IRS." As SSNs are spread among more databases, the possibility for identity theft rises.

There's also the issue of cost—not for the IRS, which stands to rake in more money, but for the businesses who are required to implement the changes. "Particularly for smaller operators," says the CDT, "the Treasury proposal represents a potentially crippling increase in record keeping, storage and paperwork."

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2007-04-14T06:06:50Z

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