Geneva: India and South Africa received a big boost in their campaign for reconsidering the current moratorium for not levying the customs duties on electronic transmissions at the World Trade Organization, after a proposal to advance international negotiations for taxing global digital platforms and digital services was presented today at the Paris-based Organization for Economic Cooperation and Development (OECD).
The OECD’s proposal seeks to “re-allocate some profits and corresponding taxing rights to countries and jurisdictions where MNES (Multi-national Enterprises) have their markets.”
“We’re making real progress to address the tax challenges arising from digitialisation of the economy, and to continue advancing toward a consensus-based solution to overhaul the rules-based international tax system by 2020,” said Angel Gurria, the OECD’s Secretary-General, today.
The OECD, the rich country club for global economic policy-making and rules, was established by the US in 1961 stimulate economic progress and world trade. Currently, the OECD has 36 members, who are largely from the industrialized countries.
The OECD’s move to negotiating taxation rules for the e-commerce platforms came in the wake the growing tensions between the US and France following the introduction of digital services tax more than two months ago.
For the past two years, India and South Africa had presented several proposals as to why it is now imperative to reconsider the current moratorium for not levying the customs duties on electronic transmissions at the WTO that are denying revenues to the tune of more than $ 10 billion for developing countries.
At an informal General Council meeting on 1 October, India and South Africa made a powerful case against the current moratorium for not levying customs duties on electronic transmissions at the World Trade Organization, saying it is “asymmetrical” for developing countries due to its negative fiscal consequences and digital industrialization.
In response to the arguments provided by India and South Africa against continuing with the moratorium, the United States, the European Union, and several other industrialized countries resorted to stonewalling tactics by refusing to engage in a serious debate over the implications arising from the moratorium, said trade envoys, who preferred not to be identified.
The current moratorium for not levying customs duties, which came into existence in 1998, will end in December unless WTO members extend it for another two years.
At the meeting, India’s trade envoy Ambassador J.S. Deepak called for convening a workshop to consider various studies, particularly studies by the United Nations Conference on Trade and Development, the European Centre for International Political Economy (ECIPE), and the Paris-based International Chamber of Commerce. While the UNCTAD favored discontinuing with the current moratorium for not levying customs duties on electronic transmissions, the ECIPE and ICC pressed for a permanent moratorium for not imposing customs duties.
With the rapidly evolving e-commerce trade, particularly “the advent of industry 4.0 and 3D printing technologies, the moratorium will erode the existing GATT (General Agreement on Tariffs and Trade) bound rates which are typically higher in developing countries.”
According to the South African trade envoy, all the existing literature and research points“out that developing countries would be bearing the brunt of losses of revenue due to the moratorium.”
The US, however, opposed India’s call for a workshop by the WTO Secretariat saying there is no need to hold another workshop at this juncture, said a trade envoy, who asked not to be quoted.
Further, the US along with other developed and several developing countries, who are all members of the informal plurilateral informal Joint Statement Initiative (JSI) group, are privately lobbying for a permanent moratorium to be announced at the General Council meeting later this month, said a trade envoy, who asked not to be quoted.
It would be untenable to block the joint proposal from India and South Africa to re-consider the current moratorium for not levying customs duties by the US and other industrialized countries, while allowing the OECD to start negotiations on taxing the digital platforms by the same countries, said a trade envoy, who asked not to be quoted.