Online business Toolkit

The return of the stealth tax

Declan McCullagh CNET News.com

Published: 20 Dec 2004 13:55 GMT

It's been five years since Internet users had to worry about paying an extra $1 or so annual fee -- akin to a tax -- for each .com, .net or .org domain name they own.

Now the international organisation that oversees domain names has rediscovered the idea. The Internet Corporation for Assigned Names and Numbers (ICANN) believes it needs a fatter budget funded by domain name fees -- and plans to start charging domain name owners in a process that will begin next year.

Starting sometime in 2005, owners of .net domain names will have to pay a 75-cent additional annual fee to ICANN. There's nothing stopping ICANN from upping the levy in the future, and its executives have indicated that other top-level domains will be targeted as well.

Before deciding to play tax collector, though, ICANN should consider what happened back in 1999 that caused it to concoct and then abandon the idea.

Worried about running out of money, ICANN's board had proposed a $1 annual domain name fee that it insisted was justified by "the consensus of various Internet communities".

It wasn't. Everyone from US presidential perennial Ralph Nader to Republican insider Grover Norquist castigated ICANN for levying an "illegal tax" on domain name holders. A letter from Nader to ICANN chair Esther Dyson (who now works for CNET, publisher of ZDNet UK) wondered whether ICANN had the authority and where all the money would go.

Norquist, a close ally of President Bush who runs Americans for Tax Reform was more direct. He testified before Congress that ICANN wanted to levy "the world's first global tax" on unsuspecting Internet users.

"This is an arbitrary cost imposed on a business transaction that is used to fund regulators, administrators and bureaucrats mostly based in Europe -- that sure sounds like a tax," Norquist said at the time. "The idea that taxpayer dollars should be spent to host lavish receptions and secret board meetings in five-star hotels in Singapore, Berlin and Santiago for nine unelected and unaccountable ICANN board members is a travesty."