Ana Andrijević   28 Sep 2016   Alumni, Internet Governance

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With contributions from Barbara Rosen Jacobson, Roxana Radu, Marília Maciel, Adriana Minović, and Jovan Kurbalija

E-commerce has been remarkably present in intergovernmental forums this summer. Many new initiatives have flourished. This was paralleled by developments at the national level, where the taxation of electronic commerce gained renewed impetus.

Testimony to the expansion of e-commerce as a leading business model is the interest in the .shop generic top-level domain (gTLD), which is available to the wider public starting 26 September. Many major brands and retailers have already registered during the so-called Sunrise phase, with applications for names including etsy.shop, walmart.shop and facebook.shop. The Japanese company GMO Registry is the operator behind this new gTLD, having acquired the related rights for over $41 million, beating companies such as Google and Amazon.

The OECD Ministerial Meeting on the Digital Economy, held in Cancún, Mexico, in June, was among the most important gatherings in the field. Countries agreed on a range of proposals aimed at boosting e-commerce, such as increasing access to broadband; narrowing the digital divide; and pursuing opportunities arising from the Internet of Things, cloud computing, and data analytics. The goal is to look beyond the ICT sector, and design policies, from tax to transport, ready for the digital era. The topic has also been discussed in the Asia-Pacific region. Following its meeting in Shenzhen, China, in August, the APEC Business Advisory Council recommended improving Internet access and strengthening e-commerce in order to provide market opportunities for small businesses, given the potential of the economic growth in Asia-Pacific.

On the national level, India has been one of the most active countries in terms of new initiatives regarding e-commerce over the last six months. This dynamism brings about consequences beyond its borders. In May 2016, changes were introduced to the Union Budget, following a proposal by a government-appointed panel regarding the taxation of e-commerce. Among the changes was the announcement of India’s digital tax, called the equalisation levy (EQL), which came into effect on 1 June. It provides that online services are subject to an ‘equalising levy’ of 6–8% of gross payment transactions, if the provider of the service is a foreign entity without a ‘permanent establishment’ in India. The tax is expected to neutralise the advantage that foreign e-commerce firms enjoy over India-based local competitors, thereby mainly targeting digital multinationals, such as Google and Facebook.

A similar issue has been raised in Indonesia. In April this year, the country’s then Finance Minister, Bambang Brodjonegoro, claimed that the country would ‘be serious in straightening up taxes on digital economy’. The Indonesian Taxation Directorate targeted Google, arguing that  the company owes unpaid taxes from its advertising revenues. According to the Indonesian tax office, Google only allocated 4% of its revenue to be taxed.

In Russia, the State Duma has also been focusing on a new tax regulation targeting mainly big Internet companies, knows as the Google tax law. According to this law, foreign Internet companies would be taxed with a value added tax (VAT) on the sale of online content. They would also need to register in Russia ‘and submit information on their sales in the country’. If the law passes the Federation Council, it will come into force on 1 January 2017.

Providers of goods and services are not the only the target of new tax bills. India, for example, released a new model law on online taxation, likely to be enacted in April 2017, which creates a uniform tax over the purchase of goods and services. China is also focusing on imports and is changing its regulations related to tax on imported goods that are sold online. It aims to replace the parcel tax, which was applied to imports sold online, by VAT and consumption duties, with a 30% discount that will benefit Chinese consumers.

Another important measure to boost e-commerce and increase financial growth is to close the digital divide. Under the framework of its Union Budget, the Indian government has planned to reduce the digital gap by providing digital devices and bringing connectivity to about 60 million households. Pursuing a similar purpose and in an effort to bridge the rural-urban divide, the international company Alibaba plans to train a million teenagers in rural areas in China to help them start their own online businesses. Alibaba will work together with the China Communist Youth League, investing about $154 million in the project.

On the African continent, South Africa's Deputy Minister of Telecommunications and Postal Services, Hlengiwe Mkhize, and China's Vice Minister of Cyber Space Administration, Wang Xiujun, met in Durban to talk about cooperating in the area of ICT. The roundtable took the form of public meetings between the delegations, exploring potential partnerships, including on e-government, cybersecurity, and the incubation of small and medium ICT companies.

The European Union and the Indian government agreed on an EU-India Agenda for Action 2020, at their 13th Summit held in March this year. The Agenda aims to serve as a common roadmap that seeks to create synergies between the Digital India initiative and the EU's Digital Single Market and reaffirms a bilateral partnership in the field of ICTs. Furthermore, India and the EU agreed to work towards a Joint Declaration on 5G, and to share expertise in the areas of cybersecurity and infrastructure.

[At European level, other important developments have been taking place, including consultations and sector inquiries into e-commerce aspects, and recent court rulings affecting e-commerce. These are described in E-commerce in Europe: consultations, court rulings, and other updates in September]

There is broad consenses that e-commerce can foster development and advancement of many sustainable development goals (SDGs).

Recent initiatives seem to indicate that there is political will to enhance access to e-commerce and bridge the digital divide. However, there are different approaches to realising these e-commerce potentials. Would Internet access and the free flow of data be sufficient? Not necessarily, as was indicated by the World Bank’s Digital Dividend report. Digital growth must be supported by ‘analogue’ solutions, in particular enabling regulation. Most of the future discussions will be on creating this enabling policy environment which would both ensure digital growth and protect the legitimate interests of developing countries. For example, one open issue is the current regulatory wave that is mainly focusing on taxation. Targeting international companies, such as Google and Apple could have collateral and unintended consequences in addition to legitimate policy concerns.

The enormous potential of e-commerce could be realised if policymakers search for win-win solutions for all concerned. The search for win-win solutions to inclusive trade and digital innovation will be in focus at the 15th annual WTO Public Forum in Geneva, between 27 and 29 September. This year’s theme is inclusive trade and digital innovation.

Follow the latest updates and session reports from the WTO Public Forum provided by DiploFoundation and the Geneva Internet Platform.

Comments

  • Scarlett Fondeur (not verified), 08/14/2020 - 13:54

    See also the launch of the eTrade for All initiative at the UNCTAD 14 in July. It emphasizes the multistakeholder approach to leveraging the benefits of (and the expanding the adoption of) e-commerce in developing countries. More information at unctad.org/etrade-for-all

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