Digital downloads, streaming may get taxed as WTO talks stall

Suspense continues over whether digital downloads and video streaming will face a levy of customs duty globally from tomorrow. Any such levy, if imposed, will impact operations of big tech companies. The moratorium on levy of customs duties on electronic transmissions expires today, as members of the World Trade Organization failed to reach a consensus on the issue. Meanwhile, India's Commerce Ministry said in a statement that the issue of the moratorium and the Work Programme on E-Commerce will now be taken up for decision at the next meeting of the WTO General Council in Geneva.

On discussions on e-commerce at the 14th WTO Ministerial Conference (MC-14) in Cameroon, India's Commerce Ministry said it had extended support for robust work at the WTO, with a focus on critical issues such as the digital divide, digital infrastructure and skills, and regulatory frameworks. Stating that India aims to ensure developing countries and LDCs have the tools to build their own digital futures, the Ministry said in a press release that it had "engaged constructively towards members’ efforts at reaching a convergence on the issue of extension of the moratorium on customs duty on electronic transmissions." However, despite rigorous engagement and the MC-14 stretching into an unscheduled fifth day on March 30, several contentious issues remained unresolved due to lack of consensus among member countries. With the existing moratoriums on electronic transmissions and TRIPS non-violation slated to expire on March 31, the impasse at the WTO may lead to levy of duties on digital downloads and streaming. Brazil opposed the extension of the waiver on duties on electronic transmissions, while several developed nations sought long-term waivers, with the United States seeking a five-year extension.

Estimates suggest a potential annual tariff revenue loss of $10 billion for developing countries, and over $500 million for India, due to the moratorium, which has been in place since 1998. While member countries agreed to continue talks on unresolved issues at the WTO headquarters in Geneva, a lack of extension could mean the imposition of duties on electronic transmissions after 28 years of waiver. Since May 1998, WTO members have agreed biennially not to impose customs duties on electronic transmissions, extending the moratorium every two years until the recently concluded MC-14.

The WTO's work programme defines e-commerce as the production, distribution, marketing, sale or delivery of goods and services by electronic means. Noting that challenges have arisen due to the digitisation of many goods, India has indicated that the scope of the moratorium needs to account for physical goods that have been digitised over time, with streaming services replacing CDs and DVDs, and e-books replacing physical books. Having already placed papers inviting further discussions on subjects such as consumer protection, digital public infrastructure, and competition, government sources stressed the need to promote competition in the e-commerce space.

GTRI Founder Ajay Shrivastava said the lapse of the duty waiver would open the door for countries to impose tariffs on digital transmissions, adding that most gains from such waivers benefit top US tech companies, including Google and Meta. As profits and revenues of players in the digital transmission space continue to rise, the moratorium has limited the ability of developing countries to generate additional tariff revenue by regulating such imports.

At the last WTO Ministerial (MC-13) in Abu Dhabi, India had sought continued discussions on the scope and objective of the e-commerce moratorium. While the United States backed extension of the moratorium, several developed and developing countries remained divided on the issue. An Indian government official said: "We are not in favour of extension. We are in favour of continuation of the work programme. There is a need to look at the subject from a development dimension and not from the perspective of big tech companies. There is a need to discuss the scope of the moratorium as there are revenue implications, and there is a need for a clear definition of e-commerce trade. We need policy space for the sector."