One factor holding back electronic commerce in Europe is that only around 25% of people on the Continent have personal computers at home, compared to about 50% in the U.S. But Sweden is proving the exception, racing ahead with a home computer penetration that could reach 60% by the end of 1999.

How has Sweden stolen a march on the rest of Europe? A key incentive is a tax break to encourage the purchase of PCs for the home. In other European countries, when an employer makes computer equipment available for employees to use at home it is often taxed as a fringe benefit. The Swedish government's decision in 1998 to remove this disincentive prompted some of the country's biggest corporations to underwrite the purchase of top-range PCs. Over 31,000 of Volvo's 40,000 employees signed up last May for fully-loaded IBM Aptiva computers complete with a color printer. The computers are leased to the employees for $34 per month over 36 months, a price that includes a subscription to the Internet.

At the end of that period, employees have the choice of giving the PC back or buying it at a fair market price. Volvo underwrites at least 50% of the cost, which includes help desk support. A condition of the leasing agreement is that employees train at home on their own time and pass the European Computer Driving License, a standardized test which measures mastery of general IT knowledge, word processing, spread sheets and Microsoft Word. More than half a million company-provided PCs were shipped to Swedish homes in 1998. Sales increased 60%, three times the European average of 20%, according to Terry Ernest-Jones, a research manager at technology consultancy International Data Corp.

Analysts say $941 million of the $2.35 billion in 1998 Swedish PC sales can be attributed to employee purchase programs. Christer Albom, a 30-year-old Volvo assembly line worker in Gothenburg, got his home PC through his company's program, and figures he saved around $1,176. Having his own PC — which he says he could not have afforded without the company's aid — has encouraged him to improve his skills and surf the Internet although he hasn't bought anything online yet. "The goal is to raise the IT skills level of our employees, both blue-collar and white-collar," says Christina Fjellman, a member of Volvo's PC employee purchase program steering committee. "It is a benefit for the company."

Some companies in other European countries are adopting the same model. Tele Danmark, Denmark's dominant phone operator, began in late May to offer its 14,000 employees a choice of leasing one of several PC models for $84 a month over 36 months if they agree to take the European Computer Driving License test. Danish tax law never required employees to pay a fringe benefit tax for this type of arrangement but it does slap tax on Internet access subscriptions and ISDN fast phone links, so Tele Danmark said it has not included this in the package. A recent bid by the opposition to drop the tax on Internet access and phone lines narrowly failed to pass the Danish Parliament.

The German and French governments say they have no plans to ease tax laws on company-provided home PCs, but Norway has adopted rules similar to Sweden's, and since April employees in Britain can take up the loan of a PC worth less than $3,200 from their employer without a tax charge. But the most important thing governments can do to increase Internet usage would be to force national phone companies to lower local charges, which roughly double the cost of going online.

As long as potential e-consumers have to be careful about the length of time they stay connected, Europeans will never fully exploit the Web's potential.