Elizabeth Davidson reports

THE UK could attract $500m- worth of Internet-based commerce if it set itself up as a tax-friendly zone, according to a computer lawyer.

Computer Lawyers Consortium chair Roger Loosely, a partner at Fladgate Fielder and head of its technology law unit, has called on the UK Government to "act quickly" and take VAT and taxes off Internet transactions to establish a tariff-free regime.

He argues in a paper published by the European Media Forum this month that Internet business would be worth "$2bn by 2002" and that if the UK took taxes and VAT off Internet transactions then it could encourage business.

He says: "The key to the colonisation of cyberspace is in encouraging parts of the Internet to divulge where they are, by making it worth their while to do so."

His argument is that when Internet trade is eventually regulated the UK will already have attracted the business without breaking trade rules.

It is currently almost impossible to levy tax on Internet trade as the place of business cannot be traced. Loosely said his plans rested on a place of business being established in the first place.

But Leeds University cyberlaw lecturer David Wall doubted that the proposals were feasible. He said: "The problem is how you establish jurisdiction in the first place, how you get countries to agree to regulations and how you police these.

"Even if it were possible, establishing the UK as a tax-free zone would seem to be unethical because it gives the UK an unfair advantage in trade."

But he added: "I do not discount these ideas because 10 years ago the Internet as it is now would have seemed in the realms of science fiction."

Loosely denied the proposals were unethical or anti-competitive, arguing the plans would "help protect the consumer".