1. 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 www.unctad.org/ecommerce susan.teltscher@unctad.org

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

3. Government revenue shares

4. 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

5. 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

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

7. World Trade in DP, 1999 World Developed c. Developing c. Total imports, US$ bill. 48.2 40.5 7.7 Total exports, US$ bill. 46.4 41.0 7.7 DP imports, % share 0.9 1.0 0.4 DP exports, % share 0.9 1.1 0.4 % share world DP imports 100 81.5 18.5 % share world DP exports 100 88.5 11.5

8. Annual growth rates of DP imports

9. Annual growth rates of DP exports

10. DP exports by commodity group

11. DP imports by commodity group

12. Applied MFN rates on DP imports, 1999

13. Applied MFN rates on DP imports per commodity group

14. DP Tariff Revenues, 1999

15. DP Imports and Tariff Revenues, 1999

16. 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 %

17. DP Import Revenues, 1999

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

19. 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 2005 22% of online sales of DP will be delivered digitally in 2004 (software 40%, music 25%, video games 14%, books 14%, film 1.5%)

20. 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

21. 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

22. WTO Committee on Trade and Development Seminar on Revenue Implications of E-Commerce Geneva, 22 April 2002 Thank you www.unctad.org/ecommerce susan.teltscher@unctad.org