WTO Committee on Trade and Development Seminar on Revenue Implications of E-Commerce Geneva, 22 April 2002 Revenue Implications of E-Commerce: The Development Dimension Dr. Susanne Teltscher United Nations Conference on Trade and Development

Presentation Outline Government revenue sources Customs moratorium Trade in digitized products Tariff revenues from digitized products Other revenue implications Conclusions

Government revenue shares

Customs moratorium on electronic transmissions What are electronic transmissions? Customs duties: usually on goods Problem: goods sent digitally Potential customs revenue losses on digitized products

Digitized products - definition Can be delivered physically or digitally Can be identified by HS code Can be transformed into digital format Physical delivery: via carrier medium Digital delivery: via networks Books, software, music, film, video games

Customs revenues from digitized products need to look at: trade flows applied MFN tariff rates other customs duties (import taxes) revenues

World Trade in DP, 1999 World Developed c. Developing c. Total imports, US$ bill Total exports, US$ bill DP imports, % share DP exports, % share % share world DP imports % share world DP exports

Annual growth rates of DP imports

Annual growth rates of DP exports

DP exports by commodity group

DP imports by commodity group

Applied MFN rates on DP imports, 1999

Applied MFN rates on DP imports per commodity group

DP Tariff Revenues, 1999

DP Imports and Tariff Revenues, 1999

What other duties are levied on DP imports? Customs surcharges fees, uplifts, statistical taxes, port taxes add 7 % Internal taxes VAT, sales taxes, consumption taxes add 15 %

DP Import Revenues, 1999

Shares of DP Import Revenues in Total Gov. Revenue (%)

Evidence of substitution Potential vs. actual impact: Is digital delivery already replacing physical delivery? Examples and trends (Forrester): digital CD sales will overtake physical sales by 2004 publishing industry: 17.5% of revenues will result from digital delivery by % of online sales of DP will be delivered digitally in 2004 (software 40%, music 25%, video games 14%, books 14%, film 1.5%)

Conclusions - Challenges Potential tariff revenue losses are higher in developing countries (but are small in relative terms) Potential tax revenue losses (VAT) are significant in developed countries Developing countries will be net e-commerce importers (in the short-medium run) Enforcement of tax and tariff payments related to digital delivery

Conclusions - Opportunities Cheaper imports will benefit consumers and businesses E-commerce will spur cross-border trade (highest growth rates in developing countries) Developing countries are diversifying into exports of ICT-related products and services and gaining market share

WTO Committee on Trade and Development Seminar on Revenue Implications of E-Commerce Geneva, 22 April 2002 Thank you