Government likely to stamp on 2000 bug tax

Windfall levy proposal to create fighting fund for computer problem faces rejection

By David Fowler

Calls this week for a windfall tax on computer firms to create a fighting fund to help small businesses deal with the year 2000 problem, look set to be rejected by the Government.

Lord Cope, chairman of diagnostic software provider Prove It 2000 proposed the windfall tax plus tax relief on money spent implementing solutions. IT vendors should be offered immunity from litigation in return for the windfall tax, he said.

The Treasury said this week that chancellor Gordon Brown would study the proposals before responding. But a spokesman for small firms minister Barbara Roche said the Department of Trade and Industry’s position remained that there was no case for special tax treatment.

Richard Coppel, Prove It 2000’s chief executive, said the tax should be levied on hardware manufacturers, particularly PC makers; software manufacturers; and makers of other electronic equipment affected.

He called on the Government to create a panel of tax and IT experts and hardware and software vendors to debate the proposal over two weeks and suggest solutions that could be implemented within eight weeks.

Also, Coppel said manufacturers should be given immunity from litigation.

The year 2000 problem arises from the use in software of two digits to denote the year. Equipment is likely to behave unpredictably when ’00’ follows ’99’.

Coppel said his proposals were ‘not about protecting the industry or apportioning blame. There is a need to get moving.’

Simon Bragg of IT consultancy Cambashi said: ‘It would certainly scare the vendors. Users would like the idea – they feel they are paying through the nose for year 2000 solutions.’

But many software vendors are offering upgrades to make their products 2000-compliant as part of a wider functional upgrade. ‘It would be difficult to define what are year 2000 excess profits,’ he said. In addition vendors could raise rates to cover the cost of the tax.