I, Tax Robot

Internet tax traps

David Weigel from the May 2007 issue

No one who surfs the Internet should assume her activity is confidential. Malicious spyware hides behind annoying Web ads. Harmless search engines use data crawlers to collect information from almost every site online. And if you live in Canada, the United Kingdom, Austria, Denmark, or the Netherlands, the taxman may be watching your every click.

Launched in the Netherlands in 2004, Xenon is a sophisticated “spider” program that collects data from surfers without their knowledge. The program downloads Web pages where financial transactions occur—auction sites, gambling sites, online stores—and dumps the information they contain into massive databases that only the tax-collecting governments get to see.

According to Wired News, America’s Internal Revenue Service does not use Xenon but would neither confirm nor deny using a similar program in the United States. “They could be refusing because they’re already doing it,” speculates Peter Eckersley, a staff technologist at the Electronic Frontier Foundation. “Or they could be embarrassed by the fact they’re not; they want to run off and start one.”

It’s unclear exactly which elements of other nations’ Xenon programs the IRS might emulate. There are ways to craft spiders that could inform the average Web surfer of what information is being collected. But there’s always a danger that a sophisticated, hard-to-detect system monitoring Internet activity could be abused.

“Given that you’re going to have a tax system,” Eckersley says, “given that you want to have enforcement that’s as fair as possible, if you can use this to do that more effectively, that’s one thing. If they’re using this to build a long-term database, then that’s totally different. That’s something we should be trying to stop.”