An electronic government system could contribute to the erosion of privacy and give the government undue power if it does not show strong privacy concerns in its design and implementation. There is the need for proactive measures in protecting individual privacy because it can be difficult to regain once it is gone. Privacy could serve as a powerful tool to check arbitrariness and disproportionate use of power in a democratic society. Personal data is a valuable asset and it protection will play a significant role in ensuring the balance of power between citizens and state. A large scale usage, aggregation, exchange and data mining of personal data in e-government may have a negative effect on the balance of power between the citizens and the state and could result in privacy erosion. In this regard the EU i2010 action plan on e- government requires critical assessment in order to maintain the high level of regard for privacy in the EU.