High-tech executives know that India's high-tech industry is at an important crossroads. India's budding software industry is an example for the developing world. Infrastructure for the Internet is slowly but surely bringing power, knowledge and opportunities to businesses throughout rural and urban areas of India. But the government's decision on taxation of ecommerce in India can have important implications for the future of India's New Economy.

Let me explain why bureaucracy can be good and use China as an example. Last July, government officials here announced their intention to tax ecommerce activities. However, earlier this month reports came out in the press that taxation of ecommerce was fading into the horizon, a casualty of slow-moving bureaucracy. It turned out that there are so many government organizations, ministries and bureaus claiming control of ecommerce that until now no one has been able to agree on any cohesive tax structure. The beneficiaries of this bureaucratic gridlock include Internet entrepreneurs, investors and consumers. Taxation of ecommerce presents no easy solutions, and there are advocates for every possible position. The fundamental problem is that with the Internet there is no clear government or border. Transactions exist in a country known as Cyberspace, where no one is in charge and everyone is in charge at the same time. The key issue is who do you tax and where do you tax them? Imagine a Chinese national livingin India, ordering a book from Amazon.com. Where do you tax this transaction? In the US where the Amazon.com corporate HQ is based? In China where the buyer still benefits from China's social safety net? In India where the buyer currently resides? In Singapore where Amazon.com may route some of its Web traffic? Obviously there is no clear solution. So far Internet companies have been lucky. The Internet moves more quickly than governments. So just when the government is about to catch up with the Internet the Web morphs and presents governments with a new reality. So in China, while there have been many drafts and policy ideas floated, nothing significant has been done on the tax front.

In India this may change this week when the new budget is unveiled. The software industry has asked the government to cut bureaucratic red tape and reduce taxes in order to sustain a current annual rate of 50 per cent growth and achieve a $50 billion export target by 2008. Nasscom has urged Finance Minister Yashwant Sinha to allow a five-year tax moratorium on e-commerce transactions.

While it's not surprising that high tech companies oppose taxation, you may be surprised to know that I feel that ecommerce activities should be taxed-but only after the industry has matured.

Why do I feel that taxation is ultimately a necessity? Mostly because I feel that sometime soon, "e-commerce" will just be "commerce" once again.Today, if you call a company on the phone you don't call it "phone commerce." If you fax a company a purchase order you don't call it "fax commerce." When the Internet is absorbed into all aspects of business we will take it for granted. But now is not the time for taxation.The problem is that the same bureaucracy that has saved the Internet could kill the Internet at a critical juncture. If governments are this slow in developing tax policies, can they really adapt and move quickly enough once their policies are in place? I'm afraid that at this point the Internet will continue to move faster than bureaucracies, so we should continue to encourage Internet industry growth, not inhibit it.It's not surprising that governments in China and India are interested in mining the Internet for tax revenues. In China, the government is desperate to find new sources of revenue after budgeting a record deficit last year of 229.9 billion yuan ($27.7 billion).

However, even if a tax on e-commerce is introduced, it is unlikely to mean a major surge of funds into government coffers, as online transactions are still extremely small when set against the size of the Chinese economy as a whole. Online sales in 1999 reached just 55 million yuan ($6.6 million), accounting for less than 0.02 per cent of total consumption, compared with 1.4 per cent in the United States, according to a government-sponsored survey.Nevertheless, China still is well ahead of India in terms of Internet user growth and it continues to move quickly. This is where it is important for India's leaders to realize that taxation is not a purely domestic issue. Countries throughout Asia, hoping to spur economic growth, are initiating all sorts of incentives to encourage ecommerce.

India may find if it implements heavy taxes and red tape that jobs, investment, and technology will simply be rerouted to their neighbors. Portals could relocate offshore and serve customers in India without even setting foot on Indian soil. So at this point in time it is best for governments to sit and wait. Wait until their infrastructures are mature. Wait until ecommerce matures. Wait until neighbors begin to implement taxes. Jack Ma is CEO and founder of Alibaba.com (www.alibaba.com), the world's largest marketplace for global trade and host to one of India's largest trade communities