Yaoundé (AFP) – The future of digital taxes is dividing countries at the World Trade Organization, with the moratorium that has prohibited customs duties on electronic transmissions since 1998 front and centre in the debate. The moratorium is highly important for developed countries — notably for the United States, which is calling for it to be made permanent rather than kept under regular review. So far, only India has openly voiced disagreement with renewing the moratorium, according to several sources close to the discussions in Yaoundé at the WTO’s ministerial conference, the organisation’s biennial supreme decision-making body.
“There is only one country that’s been vocally not supporting,” a Western diplomatic source told AFP. “Normally, it’s kind of a handful of countries, whereas it’s only been one so far this time.” But since decisions are made by consensus at the WTO, exerting pressure on this issue could be a way for India to gain concessions elsewhere.
WTO members generally apply tariffs to imported goods and services, but in 1998, they agreed not to impose them on e-commerce. “The rule is to have no tariffs on what circulates via the internet,” Valerie Picard, an official with the International Chamber of Commerce, who is attending the conference, told AFP. “So when you download software, when an SME uses the cloud, when a freelancer sells a design service abroad, there are no taxes at the border,” she said. “The moratorium applies to everything that is digital. It goes far beyond digital books and music. It also includes, for example, security updates, online courses, telemedicine,” she added.
From 1998 onwards, the temporary moratorium on customs duties on electronic transmissions has been renewed at successive WTO ministerial conferences. However, discussions were particularly tense at the last ministerial meeting in 2024 in Abu Dhabi. At the last minute, India agreed not to veto an extension — but only for a maximum of two years. In the absence of a common understanding on the scope, “the continued extension of this moratorium warrants careful reconsideration,” India’s commerce minister Piyush Goyal said Thursday. The moratorium is set to expire on March 31, unless ministers in Yaoundé decide otherwise.
The African, Caribbean and Pacific Group of States at the WTO is proposing to keep the moratorium until the next ministerial conference. The United States, supported by several countries including Japan, Mexico, Australia, Norway and Switzerland, wants to make the moratorium permanent. “The United States is not interested in another temporary extension of the moratorium,” US Trade Representative Jamieson Greer said Thursday.
Approving an open-ended moratorium “will deliver stability and predictability for all traders,” while showing that the WTO can deliver results, said Joseph Barloon, the US ambassador to the organisation. To limit opposition to the moratorium, the United States under President Donald Trump has negotiated a clause in recent bilateral agreements with certain countries, notably Indonesia. “The worst case would, of course, be that we don’t have an extension of the moratorium. That’s something that we cannot exclude,” the Swiss WTO ambassador Erwin Bollinger said ahead of the conference.
Some developing countries are more reticent about the moratorium because they see it as a loss of tax revenue and argue that the rapid pace of digital transformation only exacerbates the problem. According to a 2023 study published by the Organisation for Economic Co-operation and Development, the potential budgetary impact of the moratorium is limited, “amounting to, on average, 0.68 percent of total customs revenue or 0.1 percent of total government revenue.” The OECD also noted that in most countries, the shortfall could be offset by increased VAT revenue from imports of digital services.
© 2024 AFP
