Should There Be a Tax On Software Bugs?

Should There Be a Tax On Software Bugs?
March 18 07:00 2011 Print This Article

Tax season is underway here in The States, as people square away their expenses, deductions and exemptions from the past year. Nothing new about that. But if a popular tech author had his way, software publishers would be in store for a big surprise come April 15th: a tax on software bugs.

David Rice makes the case for such a policy in his book Geekonomics. A former vulnerability analyst for the NSA and cryptologic officer in the US Navy, Rice’s name has been in the headlines of late on rumors that he is the new Director of Global Security for Apple.

So what’s his reasoning for a tax on software bugs? Here’s ComputerWorld with the premise:

Rice has floated include the notion of a Pigovian tax designed to correct the current “broken” market outcome in the software industry. That’s to say, end users pay the price for shoddy software through attacks, bolted-on security solutions, and the never-ending patching process. If security related vulnerabilities were somehow taxed, the cost burden would be shifted more from the consumer of software to the software manufacturer. That’s the idea, however many industry experts don’t think it would work.

It’s a horrible idea,” says John Pescatore, analyst at the research firm Gartner. “It’s as silly as the senator who proposed making buffer overflows illegal years ago,” he says.

“Basically, market forces are already at work. Look at the market share of IIS and Internet Explorer today compared to years ago. Every company has the ability to choose a software provider and to highly weight lack of vulnerabilities or patch histories or whatever,” Pescatore says.

Another idea mentioned in Rice’s book is the notion of liability and tort reform to make it easier to sue software makers for the damages created by faulty software. The idea, again, is to shift the costs of damages caused by shoddy software to the manufacturer.

Many argue, however, that the cost of software would rise for all consumers and that both a software security bug tax and making it easier to sue software makers for faulty software would benefit larger manufacturers who could afford to pay the taxes and lawsuits, while potentially burying open source and small independent software vendors who lack deep pockets.

Gotta agree with the Gartner analyst on this one. It’s pretty clear (to me anyway) that companies who release inferior software are eventually abandoned by consumers anyway. No need to involve the Tax Man. I also tend to agree with what the author stated in the last paragraph, that the law would benefit the companies that could afford to pay the tax, while severely damaging those with lesser budgets (i.e. 99% of all software companies).

What do you think about Rice’s proposal? Practical? Insane? Bad for business? Good for consumers?

Let us know in the comment section.


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Nataliia Vasylyna
Nataliia Vasylyna

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