Global Economy

Rising imports of electronic transmissions a threat to developing countries: UNCTAD paper

NEW DELHI: Ahead of a key decision this week, on whether countries can impose customs duties on electronic transmissions, a research paper by the United Nations Conference on Trade and Development (UNCTAD) has favoured India’s stance of ending the e-commerce moratorium which has led to loss of revenue to developing countries as it gives such transmissions immunity from taxation at the World Trade Organization (WTO).

As per the paper, developing countries are facing a threat of an “exponential rise in imports of electronic transmissions” of luxury items such as movies, music, video games and printed matter during the Covid-19 crisis but they’re unable to tax these “conspicuous imports’”, and that they need to “retain the flexibility of regulating their imports and to generate tariff revenues when needed”.

WTO members had in December last year decided to extend the moratorium on e-commerce transmissions by six months till June.

“While the profits and revenues of the digital players are rising steadily, the ability of the governments to check these conspicuous imports and generate additional tariff revenues is being severely limited because of the moratorium on customs duties,” the paper noted.

This is crucial as most of the developing countries are net importers of electronic transmissions and the moratorium takes away this flexibility from them.

In a research paper released last year, the Geneva-based organisation said that India’s potential loss of revenue by not taxing electronic transmissions is around $500 million every year.

This assumes significance as the plurilateral Joint Statement Initiative group on e-commerce including the US, EU, Australia, Singapore and Japan have sought a permanent moratorium while India and South Africa have vehemently opposed it.

Classification conundrum

“The moratorium was agreed in 1998 with no consensus on the scope of the moratorium, no clarity on how electronic transmissions are being classified or what they covered, and no notion of how the digital revolution will unfold,” the authors of the paper said.

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Moreover, given the lack of clarity on the scope of the moratorium, which depends on how transmissions are classified, the paper proposed a basis for deciding the scope of the moratorium by using the trichotomy of goods, intangible goods and services.

The paper cautioned that the implications of the moratorium goes much beyond customs tariff revenue losses for developing countries due to the advancement of new digital technologies like 3D printing.


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