Unperturbed by the relentless growth, the latest Ministerial Conference (12th MC) under the aegis of WTO organised in Geneva went ahead with the extension of a moratorium on the customs duty levied upon electronic commerce (e-commerce)1. In 1998 during the 2nd MC, all the members of the WTO under the General Council agreed not to impose customs duties on electronic transmissions (Declaration on Global Electronic Commerce or Declaration)2. It is pertinent to note that the Declaration is not perpetual i.e. after every two years, members agree to extend the moratorium at the biennial WTO MC, and it applies only to electronic transmissions (ET) of digitised products.

With the exponential growth of internet usage and partially due to the absence of physical imports during the surge of COVID-19, e-commerce has flourished unabatedly. This could be authenticated by the proliferation of digitisation of previously physical goods and their transmission through the internet leading to losses in Customs revenue. In her working paper, Senior Economic Affairs Officer Rashmi Banga argues that “Developing countries can generate 40 times more tariff revenue than developed countries by imposing customs duties on ET”3. Also, the asymmetrical development of digitalisation (often quoted as the digital divide) does carry severe implications for the domestic industry, which may be too naïve to face such competition. In this context, it is essential to highlight the role of traditional tariffs in supporting nascent domestic digital industries. Not only are these developing countries losing out on fiscal space, but the Declaration has jolted its regulatory space as they are unable to regulate growing imports of digitisable products.

Although it might seem axiomatic as it just takes a lack of consensus amongst the member States to discontinue this moratorium, the real challenge lies in defining the scope of electronic transmission. Currently, there are only 49 products that qualify as digitisable products capable of being transmitted digitally4, but this list is not exhaustive, which means that intensification in the loss of revenue would then be an inevitable corollary. It is no gainsaying that the impact of the 4th Industrial Revolution through automation has already inhibited the developing country's ability to collect customs duties, and 3D printing technologies substantiated this concern. In posterity, with the advent of 3D printing technology, physical goods will be digitised even more rapidly, thereby circumventing the previously negotiated General Agreement on Tariffs and Trade (GATT) bound rates on physical goods. Now on unravelling these intricacies, one could quickly figure out that developing countries have legitimate concerns, but their proposed solution is misguided. Unilateral imposition of customs duties on ET will not only distort the growth of the digital economy but will also be cost-prohibitive and technologically unfeasible for those developing countries themselves.

The perplexity does not end here, as WTO also grapples with attributing ET as goods, services, or intellectual property. It is a most apposite inquiry upon the given issue, as the selection of a particular head will entail the application of a specific regime i.e. GATT, General Agreement on Trade in Services (GATS) or Trade-Related Aspects of Intellectual Property Rights (TRIPS), and to add to that, customs duties are solely applicable to the goods. The Working Committees had been constituted to undertake critical appreciations of these issues, but in the pursuance of the absence of any accord amongst the member States on this issue, it has been covered up with an agreement that the existing practice of no customs duties should continue. These factors cumulatively provide a much-needed impetus to the developing nations to oppose the prolongation of this moratorium jointly.

To address the concerns of revenue losses, developing countries are advised to consider imposing non-discriminatory internal taxes and international taxation. But it is too simplistic to agree with such suggestions as these measures do not gel well with the infant industry, which might anticipate certain assistance from their respective Governments, and substituting internal taxes as an alternative to customs duties does not serve that purpose. Viewed as a viable alternative, the exponents of this suggestion lose sight of the fact that the findings (Emram and Stiglitz, 2005) confirm that the large informal sector tends to remain out of the tax net.5 Regarding international taxation, various developing countries are at the forefront of spearheading the market-based taxation rights, which (amongst other things) aims to address tax challenges arising from the digitalisation of the economy and reallocate taxing rights for large businesses to market jurisdictions. Through its participation in the G20 and Organisation for Economic Cooperation and Development (OECD's) base erosion and profit shifting (BEPS) initiative, developing countries have committed themselves to a multilateral approach for securing a fairer, stable, and non-discriminatory tax policy, yet as of date, nothing substantial has been achieved through this consensus-based approach.

While vocal about these issues, developing countries, like India and South Africa, tried to espouse the cause of disintegrating ET from digitised goods and taxing such products, which are feasible due to technological development (India-South Africa Joint Communication, 2021).6 In other words, this narrative implies that a moratorium is imposed upon electronic transmission, i.e. bits and bytes, and not on the content or product to be transmitted. This would necessitate such countries expand their harmonised system (HS) codes to include goods that can be digitised. One of the most significant limitations of existing literature is that it has not been able to contemplate the list of such putative products which could be digitised, adding salt to the wound.

In light of the aforesaid analysis, it is befitting to use this opportunity to justify the title of this submission. The rationale for ascribing the current moratorium as an “uncanny impasse” lies in the fact that these are momentous challenges, and any suggestions to curb these effects are on the scale of pragmatism of not much avail. Developed countries are keen to keep this declaration alive and pegging too much hope on the continuance of this moratorium as they advocate the positive impacts of the digital economy which outweighs the potential forgone government revenues. These contentions fall short in critically examining the challenges faced by developing nations due to the infrastructural/technological divide, thereby causing huge losses in revenue and depleting policy space. So, the underlying question is “what did this moratorium reap for the developing countries.” Hence, the Declaration is labelled as an eternal conundrum for developing countries as they are still figuring out its potential benefits along with the way forward.

† Assistant Professor in Legal Research at Rajiv Gandhi National University of Law, Punjab. Author can be reached at <saurabh_faculty@rgnul.ac.in>.

1. WTO, Twelfth WTO Ministerial Conference (June 2022), <https://www.wto.org/english/thewto_e/minist_e/mc12_e/mc12_e.htm> last seen on 20-6-2022.

2. WTO Ministerial Conference, Declaration on Global Electronic Commerce, WT/MIN (98)/DEC/2 (1998), 1 (25-5-1998), <https://www.wto.org/english/tratop_e/ecom_e/mindec1_e.htm> last seen on 19-6-2022.

3. Rashmi Banga, “Growing Trade in Electronic Transmissions: Implications for the South”, (2019) UNCTAD Research Paper No. 29/2019, <www.wto.org/english/tratop_e/ecom_e/wkmoratorium29419_e/rashmi_banga.pdf> last seen on 20-6-2022.

4. India and South Africa, The E-Commerce Moratorium: Scope and Impact (WT/GC/W/798, 2020) Work Programme on Electronic Commerce, Para 2.15, <https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S009-DP.aspx?language=E&CatalogueIdList=264789%2C264692%2C263985%2C262610%2C262031%2C261632%2C261432%2C261434%2C259951%2C259601&CurrentCatalogueIdIndex=4&FullTextHash=&HasEnglishRecord=True&HasFrenchRecord=True&HasSpanishRecord=True#> last seen on 18-6-2022.

5. M. Shahe Emran and Joseph E.Stiglitz, “On Selective Indirect Tax Reform in Developing Countries”, (2005) 89(4) Journal of Public Economics, <https://www.sciencedirect.com/science/article/abs/pii/S0047272704000933> last seen on 20-6-2022.

6. India and South Africa, The Moratorium on Customs Duties on Electronic Transmissions: Need for Clarity on its Scope and Impact (WT/GC/W/833, 2021) Work Programme on Electronic Commerce, Para 2.15. Also available at <https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/WT/GC/W833.pdf&Open=True> last seen on 18-6-2022.

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