Feb 12, 1998

US WANTS NO TAX ON "ELECTRONIC" COMMERCE

 

Geneva, 10 Feb (Chakravarthi Raghavan) -- The United States wants all WTO members to agree not to levy any tax or duty on trade via internet or electronic mail.  

The US has put forward for discussion at the next meeting of the WTO General Council on 19 February an item under the heading "Global Electronic Commerce", and is to make a statement at the Council. US officials also appear to have been briefing key delegations, while also canvassing support for it in some key capitals, particularly in Asia. 

Earlier this year, representatives of US corporations have been in Geneva pushing the same idea.  

The US move appears to be part of the wider effort to ensure that areas of trade where it has a comparative advantage and dominance should be "frozen" and left "free", while those where it has lost competitive advantage may continue to have tariff or other barriers.  

Last year, when US President Bill Clinton spoke of "free trade on internet", the WTO head Renato Ruggiero promptly welcomed the initiative and said an agreement on this could complement the Information Technology Product deal. It was then reported by trade officials that this would be one in the series of special studies that the secretariat's economic research wing would undertake and publish.  

The US argument is that while any goods ordered via electronic mail and imported into a country becomes subject to customs duty at that point, no country now levies customs duty on electronic commerce as such, nor on services delivered through electronic media, and this should be kept so and countries should bind themselves through schedules not to levy any duties in the future either.  

In briefings, US sources have cited for example an architect delivered designs to a customer in another country via internet, and not having to pay any tax on it.  

Few trade diplomats seem to have come to grips with the issue, but fewer still are even asking why this should have a priority for the WTO secretariat, when the many of the key exports of developing countries face such high tariff and other barriers still in the US and other developed countries, and the WTO head does not use his office to draw public awareness on this.  

There have been some economists who have been pointing out that while in the major industrialized countries, where taxes on incomes and on consumption provide a good tax base for state revenues, in the developing world, customs duties are still a major source of revenue.  

Some developmental economists have even been finding fault with the IMF and the World Bank in pushing through their structural reform policies reduction of tariffs (looking on tariffs purely as a trade protection), without paying any heed to the deleterious effects on state budgets by cutting or reducing a source of revenue.  

And while electronic commerce, and delivery of 'services' by this means, is not subject to "import" levies -- this is partly because it has not become an important avenue, and governments are yet to find a viable way of levying and collecting a fee on it.  

But whether this should be used to freeze options of countries in the future is a moot question.