Information technology companies were cheered yesterday when The Taoiseach, Mr Ahern, said he did not envisage introducing a "bit tax", a proposal which would specifically target electronic trading as a source of revenue. But Mr Ahern also made it clear that such businesses would not escape the Revenue Commissioners' net, and would be indirectly taxed in the usual way.

The question of how governments will tax on-line commerce will become increasingly important over the next two or three years. Although only a tiny fraction of business is now done electronically, specialists say that by the year 2000 up to a trillion dollars per annum will change hands on-line.

Speaking at the IBEC Information Age conference in Dublin, Mr Ahern said he did not feel that the implications of this shift was fully appreciated by all sections of Irish business.

The priority of his administration, he said, was to build confidence in the instruments, processes and networks of electronic commerce.

"I can assure you that we in Government are committed to finding ways to provide confidence in any areas which may lack it. I know, for its part, industry has made progress in developing secure technology - such as digital signatures, digital certificates and secure electronic payment mechanisms," the Taoiseach said.

He said he was also aware that to allow such commerce to develop, there was an onus on the tax system to provide legal certainty and tax neutrality, and to rule out imposing an extra burden on these new activities as compared to ordinary business.

"I believe that existing indirect taxes can be clearly applied to electronic trade in goods and services, in the same way as they do to more traditional forms of trade," Mr Ahern told the gathering. "In this instance, there would be no need to introduce new taxes, such as a bit tax, which I know has been mooted in some quarters internationally."

Mr Ahern also said that his administration would update the Republic's laws covering intellectual property rights. He said the European Commission had identified three priorities for legislative action: a further harmonisation of the reproduction right, the communication to the public right, and the distribution right.

Mr Ahern said the legislative action would include legitimate exceptions to these rights and that any new measures would be matched by a protection of anti-copying devices.