To tax or not to tax, that is the question facing the World Trade Organisation at its meeting in Seattle next week.

Another question the organisation hopes to answer is whether music delivered over the Internet constitutes goods or services. A CD, plainly, is a product, but is a downloaded stream of bits and bytes which, reassembled, are Celine Dion's latest album, might be considered a service, since no tangible product changes hands.

The outcome of the WTO deliberations could affect Bermuda' burgeoning e-commerce industry, although aoservers do not expect the WTO to do much more than defer the major decisions it faces.

US officials have said they expect to achieve their top Internet-related priority at the upcoming talks: the extension for at least 18 months of an international agreement making cyberspace a duty-free zone.

Not to tax, appears to be the official US line.

But beyond immediate talk of taxation looms the larger question of whether it is possible to tax or regulate Internet transactions without crushing the potential of the burgeoning new medium.

"Cyberspace is a world with no national borders and no trade barriers -- yet,'' said Michael Michalak, a senior adviser to the National Centre for Asia-Pacific Economic Cooperation.

The United States wants to maintain its competitive lead in the e-commerce field, but developing countries just hopping on the Web wagon are wary of giving away too much too soon, said Mr. Michalak, a veteran US diplomat.

"There is a fear that US moves are very much designed to make the world safe for Microsoft and Oracle and companies like that,'' Michalak said. US companies, well aware of those concerns, are trying to address them through technology programs that aim to bridge the "digital divide'' between rich and poor nations.

But it is expected that, at the very least, developing countries will block efforts to impose a permanent ban on tariffs for digital transactions, in part to use it as a bargaining chip in the upcoming trade round, experts said.

Developing countries also may use the Seattle talks, which begin on Tuesday, to press for an extension of a December 31 deadline requiring that they have laws and enforcement plans to protect copyrighted material such as software and music.

The current temporary moratorium on customs duties, in place since a May 1998 WTO agreement, applies only to goods and services transmitted electronically, such as software, digital books and music.

While nearly all the WTO's 134 member countries back an extension of the moratorium, a dispute has broken out between the United States and the European Union over whether to classify such transactions as goods or services.

TAXES TAX