US government wants PayPal records

The US government has ordered online auctioneer eBay's payment service PayPal to turn over records that could expose foreign accounts where tax cheats have hidden money, PayPal said last night.

The US Internal Revenue Service wants the company to reveal the details of accounts linked to banks or credit cards in 35 countries. A summons issued by US District Court Judge James Ware in San Jose ordered PayPal to hand over records dating back to 1999, when the Internet money-transfer service was launched.

PayPal said it was evaluating its options, and added that it takes the privacy of its customers'  information very seriously. Tax collectors wanted records of transactions connected to countries where local laws could protect specious tax shelters from scrutiny by US officials, it said.

The IRS investigation has been going on for several years and court orders for information have been served on credit card companies, but this is the first time the Internet company has been tapped for information. PayPal offers service in less than a third of the locations listed in the summons, according to the company.

Those places were Anguilla, Costa Rica, Cypress, Hong Kong, Latvia, Luxembourg, Malta, Singapore, Switzerland, the Channel Islands and the Isle of Man, PayPal said. There were more than 100 million PayPal accounts in service as of yesterday, the company said.

The demand promised to heighten concerns of online privacy advocates that contend law enforcement officials see the Internet as a virtual gold mine of information about people's lives and activities.

A battle between Internet search titan Google and the US Department of Justice ended last month with Ware ordering the California-based company to turn over data about what people are seeking on the Internet. In what was hailed as a victory, Google convinced Ware to make the company provide only a sliver of the information originally requested by the government. Ware ordered Google to turn over a random list of 50,000 website addresses resulting from Internet search requests.