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The Almighty Buck

Taxing Free Software 238

Jarek Sygitowicz writes "Lets look backward: nearly a month ago. One officer taxed 6 GNU/Linux boxes and two Star Offices at the price of 6 Microsoft Windows and 2 Microsoft Offices. The affair was widely commented and stirred a wave of protests. We heard from various sources that the Government, trying to patch a big hole, is preparing for the impossible: a tax on using Free Software." Sounds crazy? For now this is true only in Poland (which, btw, has the coolest tld, even if they have a messed up tax system ;)
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Taxing Free Software

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  • Hey... I'm all for taxing free products... Just make the tax a certain percentage of the purchase price! In this case, we'll assume a tax of 100%:

    100% x FREE = STILL FREE
  • Several months ago the Polish tresury dept made MS the official OS for doing business with the government. You must us Windows and an un named piece of software to do business with them. I have a friend who works for an exporter in Poland. He is really upset. He is also the main distributor for StarOffice in Poland. Now he sees that he will be shutdown if he does not buy into the MS scam. Look for the same thing to happen here.

    Apple Poland has threatened suit if MS and the Polish governement does not make access available for Macs and other OS's.

    I guess there was more to the deal than just making MS the official OS.
  • by redelm ( 54142 ) on Monday November 20, 2000 @04:28AM (#612878) Homepage
    Well, I don't know anything about Polish Law. But I can see how this might happen: where there are VAT or other taxes on property/transfers, then some sort of fair market value must be used for the taxation. A common method of tax evasion is undervaluing the property.

    The Polish tax official obviously thought that Linux and StarOffice were at least as good as MS-Windows and Office. As you going to dispute his good judgement? So they were worth as much, and should be taxed as much.

    This is not an easy dilemma for free software to solve. The concept of something good for nothing sounds impossible to many people. Tax officials read that impossibility as tax evasion.

  • -That ballot was approved by both major parties in Florida.
    -That ballot had MUCH larger text than the previous version, specifically for the elderly. That's why the punch holes were arranged in that manner with BIG ARROWS pointing to the correct ones.
    -Sample ballots were made available in Florida as in all 49 other states.
    -There were carbon-based life forms available at the polling places to assist the voters.
    -You are a troll.

  • This sort of action would be enough to create a public out cry from the universities and the developers.

    So what? Our "great" govt is not going to be scared by some people protesting. They just want our money and they are going to get it - at any cost (to the citizens).

    They managed to ruin country with so called reforms and now they HAVE TO grab more money to support the new, "more efficient" system.

    Besides, the tax offices are known for their creativity. Three(?) years ago, they decided that CDs included with computer magazines should be taxed (they shouldn't be, as they're the part of publication and publications are still tax-free), and managed to extort such invalid tax for a year; only to have to return it with interest when they lost the case (and who paid for that? of course not the jerks that invented such scheme).

    I would also be curious to know how Poland treats non-profit organizations?

    It entirely depends on whether the organization's run by the friends of people in power, then they can borrow money and stuff and not return it. Communism may be formally outlawed here, but the communist way of thinking is still popularn among the governemnt and it's employees.

    Oh yes, and we still have a wonderful telecom monopoly, so posting this comment is going to cost me some 25 cents.



    --
  • You can't tax bits going over a wire. Instead of buying CDs, simply download your executables over the 'net, hence no tax. "Boxes" of Linux or Star Office are not free, and hence should be taxed as a percentage of the purchase price.
  • My point exactly -- unless they are charging an excise tax.
  • Hmmm, perhaps I should incorporate something about sigs replying to my sig. Good thing sigs don't breed...
  • Which how taxes used to be collected in medieval times. You paid a proportion of the crops you harvested, the animals born etc to the Lord of the Manor.
  • Well.. at one time you could have dropped winblows documentation into the water (since it was paper it would have floated) but now.. Geeze.. you don't even get a magazine worth of documentation - *remembering the 30 pounds of documentatuion with MS C++ 7.0*
  • Well, the IRS did attempt to tax the guy who caught Mark McGwuire's record-breaking home run when he gave the ball back to McGwuire instead of auctioning it off for the couple of million that the bean counters figured it was worth. Luckily for him, a clueful IRS agent made an exception.


    --Fesh
    "Citizens have rights. Consumers only have wallets." - gilroy

  • No, the alternative is sometimes that no company survives. Market economics works a lot of the time, but it's not a panacea.
  • I think it's very common, yes. But not the norm. In the UK there is nothing like the tax we have in Sweden - and I'm not talking about the level of tax (which may differ wildly, of course), but the principle.
    It all goes to show that it's quite feasible to tax you for using free software, though. If they can't take the money when you buy the stuff, they will try to take it later. But take it, they will.
  • Then sell Free software for $200,000 and insist that all equivelent software be taxed for as much.

    -benc
  • It would be more than the MSDN subscription because you get source with Linux. Anyone know what the going license on Windows Source Code is?
  • But to drift back to reality a bit, it seems the tax could argued down a bit by pointing the officials at RedHat's $30 RH7 package. There's enough of a price there that you might be able to convince them that that's what the retail value of the software is -- if all else fails, you can point out that it comes in a spiffy cardboard box like most commercial software.

    In fact even a CD-ROM from a magazine is said to work - provided of course that you have an invoice for buying that magazine and such invoice was properly accounted for.

  • Ehm..don't read the newspapers alot? =) A lot of "kronofogdar" (taxmen) are attacked by angry people. Though of course, if it comes to a visit by a kronofogde, you've gone pretty far already.
  • Right now the list of places with wonderful governments is down to Iceland, Latvia & Andorra. Anyone want to post a horror story about one of these & prove me wrong?

    Well, there's always the matter of the Icelandic government selling the country's national genetic database to a biotech company, and then passing a law preventing anyone else (including the citizens of Iceland themselves) from having access to the data...

  • What would happen if you ordered a new copy every week and chalanged the tax and let them pile up. They may look into the actual price of the software. They may try selling the extra unclaimed copies. Bring a copy of the web page or catalog you ordered them from. Hopefully you will get the same agent more than once. Be sure to let him know what you are doing. Also let the local newspaper know. When you do get them, you can be ready to sell the extras to a local retailer.

  • ok, I'll bite.

    * more secure - Windows is harder to crack, because it's not designed so that something like cracking the mouse driver (gpm) gives you root access

    This is funny. I remember the mouse my friend bought few years age. I don't remember the manufacturer, It was a small shop anyway. Probably crushed out of market by Microsoft/Logitech.

    Back to the point. The mouse driver it came with, had a nice option to map commands to the extra buttons. While testing on NT3.5, we soon found out that the commands bound were run as (drum rolls) Administrator!

    So what, it was a third party driver but techically speeking so GPM as well... And I'm pretty sure that NT's drivers have local security holes just waiting for finders. So far nobody has cared to search for them since remote use of NT has been so hard. I call it Security via unusability.

  • This isn't necessarily government suckage, but Andorra is apparently used as a haven for cigarette smugglers. They have (last time I heard) no import tax on cigarettes, so smugglers have their ciggies shipped to Andorra, where they pick them up and smuggle them into France, Spain, Belgium, and beyond.

    If you do the math, it's pretty clear that if all the cigarettes legally shipped to Andorra (1,520,000,000 cigs in 1997) were legally consumed in Andorra (population 60,000), every man, woman, and child in the country would have to smoke 3.5 packs a day for a year.

    Michael
  • Makes perfect sense, from M$'s perspective
    Here in Holland, they tax everything which they don't want you to do, eg Sigarets, fule, sex ect.
  • Of course! The fat cats in Washington whose pockets are lined by big business want to make Free Software a less appealing choice.

    If there's a $299 dollar tax on free software product A, and commercial software product B goes for $299 after tax, wouldn't you have a hard time choosing? (If you weren't the slashdot zealot you are!)
  • The rules must have changed, as I ordered and received Adobe Illustrator last March from Adobe in California. It was shipped to me in Ontario Canada and I did not pay a cent of duty. I did pay the GST and PST tax on it though. The before tax cost was $199 US.

    I believe you must have paid sales taxes and NOT duty. Computer software & hardware are no longer subject to duty when shipped from the states to Canada

  • just doesn't have the same "feel" to it, eh?
  • It is taxing a form of free speech, which I suspect the Polish constitution has provisions for because (having read part of it) it seems somewhat modeled on the US constitution... Basically, software, like books or music, is a form of creative expression. If I write a book and give it to you for free, if the government decides it's as entertaining as a $30 Steven King novel, should they be able to go and tax you for a $30 purchase you never made?

    You got this soooo wrong...

    If the tax office, or worse, the Ministry of Finances, decides it wants to tax something, they just do it.

    Example: In the beginning of GSM telephony here, one of the networks made a promotion, giving customers who subscribed 601 minutes free (their "area code" is 601). The taxmen wanted to treat this as a gift and demanded payment of tax from these customers. Didn't matter whether someone used a single minute or not.

    The only thing they were utterly unsuccessful with is raising the tax on copyright payments received by writers and journalists. Only because at any attempt even their most friendly newspapers turned against them.

    It is taxing a form of free speech, which I suspect the Polish constitution has provisions for

    Also please note, that the freedom of speech is understood in European way in Poland. Meaning it's not absolute like Americans have it. Speak against the church and you're guilty of "harming religious feelings", call the govt [censored to avoid jail] and you're in for "slander of the state official".

    System changes, but thoughtcrime remains.



    --
  • To screw up this badly and do something this stupid. I can just see the dumb polock joke in this story [I'm Polish-ski so I can say that!]
    Gee, let's value your Yugo at the price of a Ferrari. Only in Poland.
    I suppose the Polock Tax people don't understand the principle of FREE do they as in FREEDOM, which is probably the same fella that assessed Moscow taxes under the Communist regime from the old CCCP.
  • In that case, I'm happy to live in the Netherlands instead of the fictional country of 'Holland' ;-)
  • Steve Hamlin [slashdot.org] remonstrateth thus:
    Close, but no cigar.

    . . .

    Dispassionate business people don't give away money, therefore some other consideration must have been present in the transaction. That invisible consideration WILL be taxed, just like any barter transaction will be taxed.

    Close enough, then, for the IRS to impute:
    Dispassionate programmers don't give away programs....
  • Let me guess. Your sense of humour returned a syntax error?
  • At the risk of responding to a troll,

    Programs written in the Perl language have their filenames end with the suffix .pl

    The Top Level Domain for Poland is .pl

    For afficianos of the Perl language, the TLD for Poland is pretty darn cool.

    Go, and feel like a Tard no more.

    A host is a host from coast to coast, but no one uses a host that's close
  • Using free software simply enhances your productivity. Since the outcome of your productivity, the 'products' which you sell in the end, will surely be taxed, there is no point in taxing the free tools. Taxing the tools is complicated, taxing the products isn't...
  • As far as I can tell taxes are levied on things that make a third party richer. We pay tax on service in restaurants, we pay tax on petrol, we pay tax on computer. All these things made money for the restaurant, the oil companies and AMD respectively so they get taxed.

    Until now I don't think there has ever been a tax levied on something that someone didn't make money on. Sure - If I bought a copy of Red Hat 7.0 and paid £50 for it then I'd expect some of that £50 to be tax for the book, the box, the time spent packing it, the CD - but not the software since it has no value to Red Hat.

    Next thing you know they'll be taxing chocolate and candy higher than water because "you enjoyed the candy more"!

  • by verbatim ( 18390 ) on Monday November 20, 2000 @04:32AM (#612909) Homepage
    What's 100% of NOTHING. ;-)

    Besides, you are taxed if you BUY a distribution from a STORE. Here in Ontario Canada, if you bought Linux in a store, you would be charged 7% PST and 8% GST. But it's FREE software...

    In a store, though, you are not buying that Linux distro. You are buying the packaging, the medium, the service of bringing it to the store and to you, the clerk earning minimum wage that sneeres that you as you walk out of the store, and a lot of other tangable things. Again, the SOFTWARE is free, the retail packaging is not.

    It would be widely unfair if, for instance, they imposed a tax simply for running software. That is silly and will never happen.

    Think people. Fuck, it's like the whole world is having this massive brain drain. Another person posted, already, that when shipping their Linux CD's they over-value on the shipping label and some countries duties will add upwards of $50 onto the price... but you ARE paying for shipping.

    Slackware 7.1 cost me $5.00. $2.00 for the blank CD, and roughly $3.00 in ISP connection fees. ALL of that was taxed and paid in full. So no matter HOW you get the software, you WILL be taxed for it. But you did get a service (your ISP) or a product (the CD) from someone which the government, in our world, has a right to tax.

    Bye now ;)

  • Not all the software that could be made has been made, thus there is scarcity for software. If there were no scarcity in software, it would be free just like air. As in "yea i'll pay you to make me something that I can already get for free". Also, software prices are no less exempt from reflecting this scarcity then anything else. The cost of producing the software, is reflected in the price. If you get no payment/utility from making your software then you loose the oportunity cost value for that software. I have no idea were the hell your getting this sofware has no market value thing. The market value for something is determined by what people will pay for it. It I could and did sell bottled air for $100 then that's the market value.
  • here in Australia basic food stuffs are tax free. Does that mean if i distribute code carved into potatoes that it can't be taxed? Or will it still be deemed equivalent to MS Office?
  • * more features - unrefutable

    Well, a bare windows install has no features compared to my debian install

    * easier to use - yep - no XF86Config for Windows users thank you

    Setup!=use

    * faster - things like KDE are *much* slower than Windows

    kde=!linux

    * more stable - the Windows GUI is much more stable than than the Linux GUI.

    This point shows that you are troll

    * more support for hardware, software, etc.

    true

    * more secure - Windows is harder to crack, because it's not designed so that something like cracking the mouse driver (gpm) gives you root access

    Sure, MUA holes are much better, give us a break...

    Szo
  • You forgot.

    Prop 13 destroyed the education system in california since the education system is financed mainly through property tax.

  • A math professor, ardent realist, is asked why he hangs a horseshoe up in his class.
    "For good luck."
    "But I thought you didn't believe in that sort of thing."
    "I don't ... but I'm told it works anyway."
  • JurriAlt137n [mailto] asks:
    How are they planning to do that? I for one wouldn't mind paying 50% taxes on a 0 dollar purchase...
    Well, folks, our Infernal Revenue Service, long the leader in mind-boggling leaps of logic, is way ahead of you on this. It's called "imputed income". Let's say I borrow a thousand bucks from my father to buy a new computer. If he doesn't charge me "enough" (or any) interest, the IRS [irs.gov] will "impute" that he could have gotten a certain "applicable federal rate" on his money, and will tax him on the money he didn't get from me.

    I am not making this up.
    I'm not that clever.

  • We, as thinking, rational people, have to stand on the fact that morality and ethics are universal, and that what's "true" for one country, MUST be "true" for another. I'm so sick of this relativistic bullshit. Right is right, and wrong is wrong - just because a population/country has a history of statist oppression doesn't mean that "it's OK for them".
  • That said, who are we (as Americans, probably the majority of the readers on Slashdot) to say how another government should be run?

    Well, in this case there is one good reason - if this way of taxing software actually works it can be reimplemented in other parts of the world. And I hope that is not something you would like to happen...

  • I think hey! was referring to Adam Smith's puzzle over why diamonds
    should be valued more highly than water, when the first is a dispensable
    trinket and the last is the most urgent necessity. The answer is that
    value has more to do with availability than usefulness.
  • How are they planning to do that? I for one wouldn't mind paying 50% taxes on a 0 dollar purchase...
  • Next on the agenda: taxing the air we breathe.

    "Its to ensure good air quality," states one government official.
  • ...demand a sun tax! We nolonger can afford to compete against this free source of energy!
  • i tried to run linuxnews.pl and nothing happened.

    bash$./linuxnews.pl
    error: are you a fuckin' idiot
    bash$


    FluX
    After 16 years, MTV has finally completed its deevolution into the shiny things network
  • True enough. I was going to try to figure out the per-minute fee break-even point, but I got distracted with work. Still, the post I replied to was from a Canadian. I'm just an ignorant 'merican, but I thought Canada has flat-rate 'net access like we do down here.
  • Your post got me wondering how long it would take to download the CD image. A CD holds about 650 MB, and with a 56K dial-up getting 5KB/s download speed, that works out to about 36 hours per CD. It seems to me a CD burner would "pay for itself" pretty quickly...
  • Residents of Poland,
    Download the ISOs of any free software you want.
    Have the man try and tax that!
    If you need ISOs, I will make them for you and put them to you.
  • candy and chocolate ARE taxed higher than water: water is a basic product you NEED for washing and drinking. You need the stuff to live. Candy and chocolate are not needed, and are taxed at the higher rate.

    //rdj
  • by tryfan ( 235825 ) on Monday November 20, 2000 @04:48AM (#612966)
    The concept is rather similar to several of the taxes we have in Sweden. You are often taxed by the perceived value of something that you own or have the use of. For example, we pay a property tax that is related to what our house MAY bring IF we sell it. That is, if you own a small house by the seaside, you are taxed by what similar houses have been sold for - even if you have owned your house for 50 years, and never made a penny out of it. In such a context, it's not at all hard to understand the Polish reasoning: the value of StarOffice is about the same as the value of MS Office (which is true, btw), so you should pay a similar amount for having the use of it. Of course, it's absurd, but many taxes are...
  • I have no idea were the hell your getting this sofware has no market value thing.

    Oh, it has a market value -- a market value of zero.

    Windows has a postive market value. Red Hat Linux has a price of zero (above duplication costs). The reason is that outfits like Cheapbytes can supply me with Red Hat 7.0 that is identical to "Official" Red Hat.

    The cost of producing the software, is reflected in the price.

    Not really. If that were true, software companies would never go out of business. In fact I will charge as much as the market will bear, and if that covers my costs plus normal profit I stay in business, if not I go bust unless I have other revenue sources.

    If you get no payment/utility from making your software then you loose the oportunity cost value for that software.

    The problem is that decisions are made on marginal profit. With free software, once the software is released under a free license the supply is infinitely price elastic - as much will be produced as anyone could please. What we have here is a kind of mirror to Ricardo's analysis of rent. Ricardo showed that because prime land is price inelastic, the landlord (as opposed to the tenant) would receive the benefit of all the lands greater productivity over poorer land (in other words it's not that the landlords are evil and greedy --it's just a scientific fact of life that landlords win and tenants lose). In the price demand graph, the price "curve" for land is a vertical line (price on the Y axis, supply on the X axis). With free software, the production curve is a horizontal line pegged at reproduction costs. This means that, in your bottled air example, that if there were a market for bottled air you couldn't charge more than the cost of the bottle plus normal profit.

    In this situation the consumer wins and the producer loses when you only take the sales of the commodity into account. Fortunately, sales are not the only revenue stream for free software companies.

    When I play 70 bucks or so for the "official" Red Hat what I am buying is supposedly the unique services that they can provide for installation.

  • Too bad you have the communist disease into your DNA...

    If I do it must be on my mother's side -- my Dad smuggled himself out of China because he didn't want to live in a Communist society. Oh, yes, and sticks and stones may break my bones.

    market value is determined by a balance between offer and demand...

    Which is exactly my point, expressed in jargon of course.

    and then your sig:
    PHP consulting for US$ 20 hourly. E-mail me now!

    Hmmm. Let's apply some pure economic reasoning to this, shall we? Since first class web developers command much higher consulting fees, what does this tell us about your coding skills?

  • Anyone know what the going license on Windows Source Code is?

    That depends on the ruble->dollar exchange rate ;)

  • Similar sorts of things happen in the UK tax system. The taxable value of a car (e.g. supplied to an employee) is based on a list price, and not on the price that the company paid for the car. The list price and the price paid can differ very markedly, and never to the tax-payer's benefit. Why? Months of correspondance with Inland Revenue never got me to the point of understanding it.
  • governments only collect tax when you earn or spend money.

    Governments, if they're allowed to get away with it, will tax whatever they damn well please. In the U.S., there are all kinds of taxes that people could challenge as arguably unjustifiable - the infamous "death" tax for example. When someone dies, everything in their estate has already been paid for, taxes included, and yet the government feels that it is entitled to siphon off a rather significant percentage - not because anything was bought or sold, but only because the property was passed from one owner's hands to another.

    Then there's the gift tax - if a car manufacturer decides it wants to simply GIVE you a car, free and clear, the transaction still requires that you pay taxes on the value of the car - even though you paid nothing for it.

    And let's not forget the vehicle ownership tax - my car is paid off, yet every year, I still have to pay the county clerk a sum of money based on the assessed value of my car.

    Then there's the issue of government protecting its own interest, rather than its responsibility to its constituents. We had a campaign locally here this election that would have reduced the revenue collected by the state by only 1%, through the reduction or elimination of certain taxes - the vehicle ownership tax being one of them. It was fought with a massive advertising campaign, replete with cries of "look at all the services that will be cut if this initiative passes!" - which was utter nonsense. Needless to say, it didn't pass, mostly I suspect, out of fear. This points out an interesting paradigm with respect to people, government, and taxes - taxes are used to "fund" government interests. Once these get started in the form of various wasteful government programs, the affected interest groups have something to lose if the tax gets repealed. Once this happens, it's almost impossible to change. The solution? Since any increase in funds to the government will invariably be used against you, a more prudent approach might be to see that these increases never happen in the first place.

  • Well, there's always the matter of the Icelandic government selling the country's national genetic database to a biotech company, and then passing a law preventing anyone else (including the citizens of Iceland themselves) from having access to the data...

    Bzzzt. Wrong. It gave the company exclusive rights to access anonymized medical records. I can still access my medical records. It's just that no other company can get a hold of it.

    This is because Icelanders have a tendency to emulate their neighbour if he's successful, but don't fully realise that there might not be a market for more of the same given the tiny population. The usual experience has been that both lose.

    What the governement was trying to prevent is a goldrush that would've killed off the budding genetic industry before it ever took off. So this is actually a Good Thing(TM).

  • I suppose it should not be surprising, but it is ironic that license agreements actually increase the market value of software by decreasing its utility.

    This statement is flawed. We both agree that the license agreement decreases the utility of the software, but it also decreases the market value. I have been involved in the acquistion of full rights to software packages, and normally these deals are in the millions, albeit usually on paper in the form of stock. This is much higher than the retail or subcription costs of the software that is being acquired.

    Quite simply, to purchase full rights to a piece of software, you had better be prepared to pay for the entire cost of development. This is true, even in the Open Source and Fre Software world, where you cannot get full rights to software, but are limited by the agreement given to you. If you want less restrictive rights (such as the right to use code without having to expose your own), then you must pay more.

  • by hey! ( 33014 ) on Monday November 20, 2000 @04:51AM (#612992) Homepage Journal
    Well, I don't know anything about Polish Law. But I can see how this might happen: where there are VAT or other taxes on property/transfers, then some sort of fair market value must be used for the taxation. A common method of tax evasion is undervaluing the property. (emphasis mine).

    Well, this brings up an interesting point. What you buy when you "buy" software is the right to use the software. The market value of that right, like any other good, depends on the balance between its utility and scarcity.

    Normally, people are willing to pay more for something with greater utility, but this ignores scarcity. Nothing has more utility than air but you can't very well tax that as it has no market value. I suppose it should not be surprising, but it is ironic that license agreements actually increase the market value of software by decreasing its utility. That is by restricting user rights to redistribute in particular, the owners of the software create scarcity where none naturally exists.

    So, this isn't a case of Grandma's diamond ring (which coincidentally has practically no utility) which has a market value equivalent to more or less similar rings. Free software has no market value, although it has great utility. Like the air, it is in abundant supply and so it is free (as in gratis) despite its utility.

  • Mind you, you COULD do worse: you could drop Windoze CD's in the bay, and get fined for dumping toxic waste
  • So buy either an "Enterprise" Linux system - or one CD set per PC. And make sure you get a proper receipt for the Software (-CDs).

    Or let a professional company issue you an official "Enterprise license" - in which they state that "you" have aquired an enterprise-wide license to use the software - licenses details provided on the installation media. Let them charge a nominal fee ($1 or so) for issuing this license (technically the cost for printing and shipping) - and make sure they provide a proper receipt.

    With this you can prove the actual value of the software (and licenses). A proven value cannot be taxed by a tax officer - he will have to guess the value if no value is given. The latter is standard procedure in nearly any country.

    I for example sometimes buy the currentmost (Debian/OpenBSD) CDs - for convenience and to deduct these costs OFF my tax (training material blabla).
  • The Polish tax official obviously thought that Linux and StarOffice were at least as good as MS-Windows and Office.

    Just to play devil's advocate here, the Polish tax official obviously undervalued the software. No, I'm not referring to the software quality, but rather the software licensing: A copy of Linux, assuming all other things being equal, would be equivilant to the cost of a site license for Windows or possibly even a $10,000 MSDN subscription.

    But to drift back to reality a bit, it seems the tax could argued down a bit by pointing the officials at RedHat's $30 RH7 package. There's enough of a price there that you might be able to convince them that that's what the retail value of the software is -- if all else fails, you can point out that it comes in a spiffy cardboard box like most commercial software.

  • "I'd really like to see the law they use to back this up."

    I don't know if the laws of Poland are on-line. Feel free to search for the tax laws of Poland.

    In this case it seems similar to the USA tax concept of taxing based on value -- if you win a $20,000 car in a contest, you have to pay tax on that $20,000 value (almost as if you had that amount of additional income, except for some gift incantations in the tax code). Even though you paid nothing for the car, you're taxed on the value of the benefit.

    Good thing they didn't try to tax it based on the 1980 price of Unix...although it's tempting to try to sell it to that government at that price...

  • I predict that prop 13 will die when the number of people getting the cheapo locked in low rates decreases (due to them dieing off) below the number of homeowners who don't ....

    That's when it'll get all the stronger. If you're paying 1% on a $200,000 house, do you really want those idiots in Sacramento raising your rates or reassessing you higher whenever they need money (see Prop39)?

  • Software companies do go out of business producing software, because you are completly ignoring the fixed cost of producing that software.


    So, I can make a more valuable product by hiring inefficient programmers that drive up my development costs? The fact is that development costs do not rationally contribute to the cost of software. I should charge as much money as will maximize my total revenues, and this had better cover my development costs. If the revenue maximizing amount is less than what covers my development costs, it is not rational to charge more than the amount that maximizes my revenues, because by definition this will lower my net revenues. QED.

    Linus is continously dumping his new software on the market below cost(his software does not reflect the costs of producing it), every time he releases a bug fix, or a new version. He is doing what microsoft did to netscape, he competes unfairly with his competition.

    Sheer twaddle! Linus gets paid to develop Linux -- in satisfaction, prestige etc. He gave it away free so he could get other people to share in its development. When MS gives away its browser for free, it is not to get other people to participate in its development, it is to prevent the development of alternative platforms for consumers to use.

    Even as a keynesian, you must admit that there is scarcity for software, since not all the software that could be made has been made.

    You are treating the word scarcity in a different way than I am, because you are lumping all the different software in there is or possibly could be into one giant category covering e-mail clients to nuclear plant control systems as if they were fungible commodities. The question is, is there a shortage of Microsoft Excel 2000? The answer is yes, because Microsoft's EULA prevents people from duplicating it. Is this a rational thing for Microsoft to do? Yes -- this is what the copyright laws are supposed to do. If they released Microsoft Excel under GPL, what would the natural price become? Zero.

    oh great now we can argue about Ricardo's theories. Not Now, and not here.

    Here you commit the same intellectual error as you do with software, as if there were some category of "Ricardian Theory" to which all members are fungible items. The fact is that like Smirth, or even Einstein he was wrong about some things, right about others. His analysis of rent was spot on.

  • This weekend I just finished "Free For All" which was reviewed [slashdot.org] on /. In the last chapter, the author makes some predictions that the current "system" is going to be very threatened by software that flows freely "like dandelion seeds blowing in the wind." Lost tax revenue is going to be a large one. Governments are going to do what they can to tax free software (governments can't resist the urge to tax anything they can get away with). This is a pretty big threat to free software. You can bet the current commercial software giants are going to put pressure behind such efforts. (Which reminds me, we also need to get rid of soft money (the other book I've been reading: How to Overthrow the Government by Arianna Huffington [ariannaonline.com], an advocate for campaign finance reform)).

    (My quick review Free for All: If you already know the history of free software/open source, there will be little in this book to learn that is worth the $23, although I did learn some things about BSD history I didn't know. I couldn't picture the general population being interested in most of the detailed explanations. There are a few sloppy mistakes such as confusing free speech vs. free beer in some chapters while explaining it in other chapters. Only in the last chapter does the author attempt to add insights instead of going over dry facts.)
  • I would like to introduce the Free, But Taxed, Software License. It is essentially the same as the GPL with one additional provision. If you represent, in any way, a government that taxes free software on any basis other than the actual amount paid for the media, you are required to pay the full amount collected in taxes to the copyright holder of the software in order to use it yourself. If the media in question contained software from multiple copyright holders, you are required to pay each of them in full. The copyright holder may agree to waive this fee in exchange for a public apology and repealing the tax.
  • Years ago the college I worked at was shipping several old Tandy 1200 computers (which were built like a tank) to Kenya. At the time computers were few and far between, even Apple ][ computers had a high relational value. Although people were well into 486 PC's at the time, these were assessed an enormous import duty, even though they were destined for a remote school, the Rift Valley Institute. The people involved threatened to just abandon them which gave the government folks some pause for thought. These clearly had limited value without support and out faculty were the only people with the old DOS and utilities to get them up and running. Possibly some enterprising soul could do something with them, but that the government was attempting to tax something being given to the people for their own training and advancement was the irony. Eventually someone, somewhere twisted the right arm or greased the right palm and they got through.

    --

  • Then it sounds like smart buyers in Poland will have to buy "naked" PCs, and then install the software themselves.

    An even better way to dodge the VAT would be to set up a service that sold bundles of unassembled OEM components known to work well together. Hmmm... could the VAT actually be a good thing, in that it would encourage DIY and tinkering in this way?

  • Your post reminds me...

    Kids always think their dad does the coolest thing. I had a friend who's dad was a doctor. He said it was the best because he could be sick for nothing. My dad is a minister so I told him I could be good for nothing.

  • Wait a minute!. Lets look at this the other way. If MS Office is the 'Same Value" as something that's free. Doen't that mean it's overpriced and over taxed?
  • by MrP- ( 45616 )
    i think you just confused the newbies even more...

    The Top Level Domain (yen)or tld, as in (copyright)com, (copyright)us, etc(copyright)(thingy?) for Poland is (copyright)pl , which also happens to be the extension for (links to www(copyright)perl(copyright)com)Perl scripts(copyright) CmdrTaco loves Perl; it's what Slashdot is based on(copyright)

    From what I understand, the "tax" on free software is more like what we in the US would call a "tariff" or a "duty(copyright)" The Polish gov't taxes imported goods as do most national governments(copyright) The screwed up part is that they're saying since free software is worth the same to computer users as non-free software, it should be taxed at the same market value(copyright) Hence taxing a copy of Star Office at the same rate as MS Office(copyright)

    In a way it's almost a compliment, as the goverment is basically admitting that free software is just any other programs available(copyright) (yen)okay so it's a stretch but let's look on the bright side of things, OK?)(closed parentheses)
    ;-(closed parentheses)


    There, maybe now people can read what you wrote :)

    -----
  • Okay, if a product is free, then they want to tax it at the price of an equivalent product. I can follow that logic, even as twisted as it may be.

    Here's the solution: Sell open source software. Charge a penny for it. Add 30% tax to the penny and round down -- it still costs one cent.

    Governments need to learn that there are some things they cannot control. The public can find ways around nearly every regulation that isn't enforced with violence.
  • ...is very simple: 1) you have to register all software and equipment used to gain commercial profit 2) these things have a concrete, measurable value 3) this being so, they should be taxed. Very coherent.

    This is meant to be a means of protection against tax abuse, e.g if you sell a car, you have to pay tax taking as a base the price you sold the car at or the "table value", . Now this protection has become a weapon against users of free software, which is a thing with it's own culture with little care of revenue board officers' concern about specific laws, tax offences, commercial gain, taxes etc.

    -- http://www.argante.org -- *the* OS

  • Actually, Tuvalo sold their TLD to a company called DotTV. See this [slashdot.org] story.
  • by knurr ( 161310 )
    How can you tax something that is Free? Using the tax you would pay on another product just aint right... If there is no money being made why tax? And how do you Tax a free product anyhoo if no one buys it how do u track its usage. Stuff like this makes me angry
  • Mind you here in California the LOLs banded together and passed an initiative that froze their tax basis at an early '80s level meaning that the rest of us end up having toshoulder much more than our share of the burden

    Ah, yes. You are talking about Prop 13.

    Prop 13 was passed in 1978

    Prop 13 limited property taxes to 1% of property value

    Prop 13 rolled back assesments to 1975 levels

    Prop 13 allows a 2% increase in "assessed value" per annum

    If a property is sold, the new base valuation of the property is the sale priceIf a property has improvements made to it (generally those requiring a permit), it is reassessed and gets a new base valuation

    Now, how many people have actually held onto their houses since 1978? Knowing government (remember Prop 39 this year), they'd have taxed us to the point where taxes are more than the mortgage.

  • Obviously this is ridiculous, and the tax office don't understand the situation:

    the software is free, and no benefit is directly conferred (i.e. it's always free, so there's no benefit) - it is not analagous to a 'free' company car or whatever

    the valuations are incorrect: Star Office is not as good as MS Office (this is not flamebait, this is simple statement of the facts); similarly Windows is in many ways more valuable than Linux (from a management perspective; in addition, the product is more advanced too - IIS, for example, since it is integrated into the NT kernel, is faster than Apache).
  • Okay, so let's say a government decides to tax something I paid $0 for - how do they do it? Do they want 5% of the purchase price? 500% - Sure, I'll pay them 500% of $0.00, no problem. I don't mind at all. While they're at it I'm willing to give them a percentage of what I paid for the air I breathe too. This is why the Polish government's actions make no sense at all.

    Before the whole free beer / free speech argument comes up, let me point out that the article specificly said they were talking about both kinds of free, so the scenario I mention *is* relevant.

  • Metropolitan France is basically European France. Offilially, it does not include French Guiana (.gf), Guadeloupe (.gp), Martinique (.mq), New Caledonia (.nc), French Polynesia (.pf), Saint Pierre and Miquelon (.pm), Reunion (.re), French Southern Territories (.tf), Wallis and Futana Islands (.wf), or Mayotte (.yt). Properly, all of these overseas "territories" are integral parts of France...
  • If you win a $20,000 car in a contest, you're a lucky guy, and it's only fair that you pay a tax on that. After all, you could sell the car, pay the tax, and still keep some change (assuming the tax is less than 100% of the car's value).

    However, free (gratis) software is an entirely different thing. You cannot sell it, because no one will pay for what you can get for $0. If anyone can get it at zero cost, its taxable value is zero. It's not like a company car or a lottery prize, which only a few privileged people get.

    Will you get a valuable benefit from free software? Sure! But is that benefit taxable? If it is, the next thing will be taxing fuel-efficient cars, because you spend less money buying fuel for them; that's a valuable benefit, too!

  • arguably unjustifiable - the infamous "death" tax

    Yes, the US estate tax is intentionally coercive. It encourages the rich to distribute their wealth charitably rather than create lazy inheritors. It's not fair capitalism, but neither is reposessing people's houses, building a baseball stadium, and giving it to a rich frat boy with good family connections. Of the two, I'm more opposed to corporate giveaways.

    GIVE you a car, free and clear, the transaction still requires that you pay taxes

    Riddle me this: if the government stopped taxing large gifts, exactly how many seconds would it take before all executive salaries were eliminated and replaced by weekly "gifts"? 'nuff said.

    my car is paid off, yet every year, I still have to pay the county

    Gee, I don't suppose the county uses that money to build the roads that you drive on? But what if you don't even drive that car? In that case, what the US really ought to do instead is charge $1 or 2 per gallon gasoline tax, like all the other western nations, so that people pay a fair share for their use of public resources.

    Americans bitch too much about taxes. We have it easy compared to most countries (with a similar standard of living). Heck, even compared to many lower-ranked countries -- wasn't that the whole point of this Poland article?
  • by mangu ( 126918 ) on Monday November 20, 2000 @07:30AM (#613053)
    Since prostitutes charge for sex, and married people get sex for free, they should pay a tax on sex, based on what prostitutes charge.
  • by istartedi ( 132515 ) on Monday November 20, 2000 @05:01AM (#613058) Journal

    They don't say how the tax is evaluated. If it were a sales tax, then they would just tax shrink-wrapped CDs and be done with it. It sounds to me like it is probably a "property tax". This is where you have to evaluate the value of all your property and pay a percentage on it. These are the most unfair types of taxes, because when you fall into poverty, not only do you lose your source of income, you have to continue paying taxes on all the stuff you own.

    Assuming that they have extensive property taxes, their problem has nothing to do with attitudes towards free software. They need a fairer tax system accross the board--either a sales tax or an income tax; something non regressive.

    Since it would be difficult for taxpayers to reform the system right away, they are forced to argue that the software has no value (obviously not true) or that it has less value than NT/office (may or may not be true, difficult to evaluate). The officer probably looked at the systems, reasoned that they do essentially the same thing, and evaluated them the same. It's actually kind of a backhanded compliment to the packages in question. For now, the taxpayer might want to ask for separate evaluations on the hardware and software, so that they can dispute one but not the other. What's tax court like on Poland?

  • A lot of people seem to think this is happening in the US. It isn't. If you'd read the article, it clearly states that this is happening in Poland.

    That said, who are we (as Americans, probably the majority of the readers on Slashdot) to say how another government should be run? They are coming from a different background, they have a different history, they have different laws. The cry of "Free software should be free!" can be heard from everyone in here, but that's a very culturocentric (doubt that's even a word) perspective.

    The US and your culture...they are not the end-all be-all.
  • by Chutzpah ( 6677 ) on Monday November 20, 2000 @04:23AM (#613070)
    A year or 2 ago, I ordered a few RedHat 6.2 CD's from www.lsl.com, I live in Canada, and when they arrived, I was charged $30 duty on them, the assesed value of the CD's was $220 a piece, even I only paid $2 each for them. This is not a new thing, they have been doing it for awhile here...
  • Yeah, DSL speeds things up considerably - a CD's worth of data would be down to 3 to 4 hours. Or just get two while you're off at work.

    Another thing - some computer magazines include CDs with distributions attached. I got a copy of debian-based Storm Linux this way from some British magazine. Would the Canadian/Polish gov't charge that much tax on a magazine?

  • if you own a small house by the seaside, you are taxed by what similar houses have been sold for

    Except that you cannot put that seaside house up on a web site so a million people could all download it and live in their own identical copies.

    Real estate has a "fair market value" because it is inherently limited in quantity. That's what the word "real" is all about. The uniqueness of any given property automatically gives it value.

    Free software has infinite supply and negligible costs. Any first year Economics textbook will tell you that its perceived value should be (near) zero.

  • If you have a 24/7 internet connection, then it's a fixed cost, and you can't factor in the "marginal cost" of the download of a distribution. This is especially true if you download it from work, where the fixed cost is paid by someone else.

    Heck, I'm still at a University, where I don't even directly pay for the internet connection.. The fixed cost is bundled in with thousands of other costs. Being that I get a better part of a tax rebate on tuition costs, and my grants are never taxed, it's entirely possible to completely avoid taxation of free software alltogether.

    This is obviously an extreme, and some people are plagued with pay-per-hour usage.. But even if you get a 50hr / month fixed rate, you can't economically consider that to be taxation of your individual online downloads.

    I'm still waiting for the following scenereo: fiber to the home, but you pay for the BW at the switching station.. Charge people for BW just as you charge them for their electric bill. Most Americans don't consider their electric expense in their every-day lives, and I think the same would be true if we had pay-per-usage of the internet, so long as BW / cost is marginal. With this, governments could tax you just like they do your normal utilities, but this would still be such a marginally small amount, that it would be on par with electricity; once again.. The main advantage is that, just like electricity, you'd have a virtually unlimited potential, but you wouldn't want to abuse that potential often because of budgeting concerns.

    -Michael

  • by LHOOQtius_ov_Borg ( 73817 ) on Monday November 20, 2000 @07:46AM (#613086)
    ...there aren't that many well-reasoned responses here that are actually opposed to this nonsense.

    Several people have pointed out that this has been predicted in "Free For All" and elsewhere, which is nice, but what to do about it? Some pointed out that taxation of real estate is based on perceived valuation if the property were sold -however, real estate is the only property treated this way in most places I know of.

    Certainly Microsoft and other commercial software companies will put pressure on governments to do this sort of thing, as it will hurt the popularity of free software, and yes perhaps charging $0.01 for the license is one way around this... And, yes, it's Poland's own business but frankly the world is getting smaller and we owe it to ourselves and our friends in Poland to - as the first international political force with easy real-time communications among us - band together and oppose all governmental and big-business activities that threaten the society we wish to have on the Internet.

    So, some issues seem to be getting ignored here.

    One problem is that this poses a huge threat to the free exchange of ideas, especially if applied to the university setting (though students and universities are often given tax breaks)... MANY in the R&D community thrive on free software, and much of it has been written by researchers and hackers for community use based on a barter-like notion of roughly equal contribution from the community (in the form of patches, suggestions, bug reports, publicity, etc.) in return for use. It may thus be necessary to codify this into licenses: anyone who contributes to the software in any ways listed by the author are considered to be "creators" of the software and can not be taxed for using their own creation. Contributions could include applying the system to novel uses and reporting this back, promoting the system for use by others, etc. which would cover some end-users, too.

    The government (in Poland in this case) is denying software creators the ability to set the valuation of their own software. If the government gets involved in price-fixing for taxation purposes, the competitive nature of the market that is allegedly a crucial part of the caplitalist system is undermined. If Microsoft and others can't provide value that makes their software worth more than $0 software, that's their problem. To get around this argument a government would need a complex system of taxation based on value to the enterprise using some pre and post installation performance metrics of the task being performed with the program and its value to the organization. Basing the tax on the price of "competing" products is government-assisted price collusion. Furthermore, it ignores the fact that there are reasons why commercial software costs money that do not apply to free software: centralized support, guarantees and warranties and some coherent - and monied - organization to sue if needed, etc. The value of the products is likely not actually the same if anything but a naive economic view (or a purely technical view of the operations of the software) is taken.

    This kind of taxation is a kind of protectionism for large software corporations, and threatens to undermine the quality of software and stifle competition as people will come to expect governments to enforce the prices of software, and even commercial companies with competitive pricing can be hurt in such a scenario. Basically, everyone will be expected to charge the same price for their software or otherwise turn-over a larger portion of their profits to the government. Commercial organizations and free software developers alike would cringe at the thought of the government making more money than they do off their work - basically it seeks to undermine the community spirit that built the movement and force commercialization (and a fixed pricing regieme) in the industry, as well as to limit price competitiveness. It actually *encourages* price collusion and other anti-capitalist measures.

    The Polish government is taking an outdated view of taxation which will be hard for governments to shake: that goods are the cornerstone of taxation. The US is already a service-based economy, so the US is quite happy to tax support services, installation services, etc. which can come with free software.

    It is taxing a form of free speech, which I suspect the Polish constitution has provisions for because (having read part of it) it seems somewhat modeled on the US constitution... Basically, software, like books or music, is a form of creative expression. If I write a book and give it to you for free, if the government decides it's as entertaining as a $30 Steven King novel, should they be able to go and tax you for a $30 purchase you never made? It both forces you to consume, and stifles the ability of authors to freely distribute their ideas.

    Finally, it undermines the licensing contract and thus any claims Poland could have to upholding such contract law. Basically, it gives the government the power to rewrite commercial contracts at will to suit its "needs"...

  • For example, we pay a property tax that is related to what our house MAY bring IF we sell it.

    Actually I think that basing property taxes on current valuation is the norm throughout the western world, and probably everywehere else too. Otherwise little old ladies who've lived in their houses for 60 years will inflate away their tax basis and end up paying far less than their share (Mind you here in California the LOLs banded together and passed an initiative that froze their tax basis at an early '80s level meaning that the rest of us end up having toshoulder much more than our share of the burden)

  • by llywrch ( 9023 ) on Monday November 20, 2000 @05:39AM (#613088) Homepage Journal
    Once upon a time, I thought that only my native country had venial & corrupt politicinas whose actions favored the rich. Then I started reading the Internet, & the horror stories started to change my mind.

    Since then, I've come to determine the only countries that are actually & proveably better run than mine are those (1) I've never been to, (2) I've never heard a complaint from a local about, & (3) have never made the news for some stupid act of its politicians. Right now the list of places with wonderful governments is down to Iceland, Latvia & Andorra.

    Anyone want to post a horror story about one of these & prove me wrong? I figure it's only a matter of time.

    Geoff
  • This statement is flawed. We both agree that the license agreement decreases the utility of the software, but it also decreases the market value. I have been involved in the acquistion of full rights to software packages, and normally these deals are in the millions, albeit usually on paper in the form of stock. This is much higher than the retail or subcription costs of the software that is being acquired.

    No. I'm not arguing in generalities here, but against them. It is not generally the case that adding restrictions to a license always increases market prices; nor is it the case that removing them always increases market prices.

    Example: If Microsoft removed the restrictions on redistributing Word, you'd be able to get a copy from a friend who already had Word. Clearly adding that particular restriction increases the market price of Word from zero to something. Removing this restriction would cause the price of Word to drop to nothing.

    You can see this hypothetical case in reality by looking at Red Hat. What is the market price of Red Hat 7.0? Well, you can get it for $3.49 from cheapbytes -- essentially the cost of the media and shipping. Either Red Hat Linux has a market price of zero or the Cheapbytes people are doing this for charity.

    The example you cite is only a subset of the possibilities. It is precisely because granting any user unrestricted rights might potentially destroy the market price of software that they must charge you through the nose. Their business model is based on market sales and by forgoing future market sales they have to recoup development costs through you.

    In any case, the argument that free software should be taxed at the same rate as the equivalent commercial software depends on the kind of tax. It is not true of tax based on the transfer of value (such as a sales tax or I believe VAT). However excise taxes are theoretically based on use, and the market value is only used as an approximation of the utility value. Thus for excise taxes you could argue that free software should be taxed at the same rate as commercial software.

    Whether this is a good way to tax is a different story altogether.

  • by Art_XIV ( 249990 ) on Monday November 20, 2000 @07:55AM (#613091) Journal

    Quit yer damn bitchin'!

    A government (yes, even a Polish one) has to tax something now, doesn't it? How else can can a government stay in existence long enough to start wars, arrest people for now wearing seatbelts, and collect more taxes?

    A governing body or entity can tax pretty much anything it wants --

    • Smiling at monkeys.
    • Use of the color teal.
    • Body Odor.
    • Thoughts of sex with persons between the ages of 16 and 18.
    • Asparagus

    The trick is avoid making inordinately large numbers of people feel like they are being singled out, unless the majority of people feel that this group is "bad" or is doing something "bad", like evil, rotten tobacco users (here in the US).

    Taxing free software? SCREW YOU! Give up the money, "citizen"!

    Harry Browne for President, 2004

  • Yes, you are right.

    I don't disagree with redelm about utility being subjective -- in the end that's the main reason for capitlism, isn't it? Granny's ring was probably priceless to her, which is why she hung on to it rather than to sell it to raise money for buying a nice reliable index fund. I think that Linux and MacOS have a lot of this kind of subjective utility to them. I use Linux because it is fun, I use Microsoft because my customers make me.

  • I wonder how they will tax a subscription to Office X from Microsoft? It is NOT software but a subscription. But with the M$ EULAs, you really don't own it but are using a copy. So the tax bill should go to the owner(Microsoft) and not the user.
  • by arivanov ( 12034 ) on Monday November 20, 2000 @04:26AM (#613102) Homepage
    Well.. Well... Well... Why I am not amazed.

    Speaking from my own experience from these parts of the world (though not exactly in the same country): This means that the treasury officer did not get his monthly share under the table. If he could he could have assigned the biggest fine possible. Just in case he is not forgotten the next time. He has kidz to feed ya know.

  • by firewort ( 180062 ) on Monday November 20, 2000 @04:27AM (#613106)
    What other FREE things are there that are taxed?

    Why does this idea have the same ring in my ear that the USPS internet tax does?

    On a lighter note, it would be hard to re-enact the Boston Tea Party substituting free software as the cause. What do we do, chuck our RH5.2 and 6.0 cd's into the bay?

    "A group of bearded men dressed insensitively as native americans further polluted the bay by dropping large amounts of unwanted compact discs into the water. The zealots attempted to sneak away, but were apprehended. "

    %kill -9 taxation
    process taxation cannot be killed


    A host is a host from coast to coast, but no one uses a host that's close
  • I'm incredulous. How can the government tax something that is free (as in speech AND as in beer) and, I might add (according to the license) is not fit for any particular purpose?

    When are we holding elections again? ;)

    -Omar

Hard work never killed anybody, but why take a chance? -- Charlie McCarthy

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