Netflix, Spotify, and other digital media providers have enjoyed exemption from international taxes on their products. This includes films, video games, and music transmitted across borders via the internet.
However, the global consensus on this issue seems to be weakening. According to ABC News, the World Trade Organization convened its biannual government minister meeting this week in Abu Dhabi.
The agenda discussed was the long-standing moratorium on e-commerce duties, renewed almost automatically since 1998, facing unprecedented pressure.
This gathering of the WTO's 164 member countries will address several critical issues, including subsidies promoting overfishing, reforms for fairer and more eco-friendly agricultural markets, and efforts to revive the organization's dispute resolution system.
Of these concerns, the moratorium on e-commerce duties stands out as one of the most contentious. It primarily applies to "electronic transmissions" like music, movies, and video games but lacks clarity on its full scope.
WTO Director-General Ngozi Okonjo-Iweala emphasized the significance of this issue for millions of businesses, especially smaller ones. She noted divergent views among members, with some advocating for the extension and permanence of the moratorium while others argue against it.
In the WTO, major decisions require consensus, making the fate of the e-commerce moratorium subject to active voting by member countries.
Why Tax Spotify, Netflix, and Others?
Proponents argue that the moratorium benefits consumers by keeping costs low and facilitating digital service expansion globally.
According to WTO data, the value of exports for digitally delivered services has outpaced goods and other services exports, albeit with disparities between developed and developing nations.
On the other hand, critics contend that it deprives developing countries of crucial tax revenue, although the extent of potential losses remains debated.
As an alternative, South Africa suggests terminating the moratorium and establishing a fund to bridge the digital divide while promoting historically disadvantaged enterprises.
In the United States, industry groups, including the Motion Picture Association and the U.S. Chamber of Commerce, advocate for extending the moratorium. Also, citing potential negative impacts on trade and the economy if it collapses.
A failure to reach a consensus would not only challenge the credibility of the WTO but also mark a significant departure from established trade norms, potentially affecting millions of workers globally.
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