Fiscal Revenue Mobilization and Digitally Traded Products: Taxing at the Border or Behind It?
IMF Notes, September 7, 2023
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Bibliographic details
- Authors: Tibor Hanappi, Adam Jakubik, Michele Ruta
- Published: September 7, 2023
- Series: IMF Notes
- DOI: https://doi.org/10.5089/9798400253614.068
Summary and scope
- Authors: Tibor Hanappi, Adam Jakubik, Michele Ruta
- Publication date: September 7, 2023
- Series and identifiers:
- IMF Notes No 2023/005
- Issue: 005
- Volume: 2023
- Pages: 25
- DOI: https://doi.org/10.5089/9798400253614.068
- Stock No: INSEA2023005
- ISBN: 9798400253614
- ISSN: 2957-4390
- Focus: trade in digitized products, fiscal revenue implications, and the role of domestic and border tax instruments as digitized trade increases and replaces physical trade.
Key findings
- Broad-based nondiscriminatory value-added taxes are preferrable to tariffs:
- Preferable on grounds of economic efficiency.
- Preferable on grounds of revenue performance.
- Easier to implement and administer compared with tariffs in the context of digitized trade.
- The WTO moratorium on customs duties on electronic transmission can help channel developing countries’ tax reform efforts in a more efficient direction.
- Developing countries that rely on tariff revenue will face difficult choices as digitized trade expands and replaces physical trade.
Policy implications and recommendations
- Shift tax policy emphasis from border tariffs to domestic value-added taxation for digitized products:
- Prioritize broad-based nondiscriminatory VATs to maintain revenue and efficiency as trade digitizes.
- Leverage international rules (e.g., the WTO moratorium on customs duties on electronic transmission) to guide efficient tax reform efforts.
- Invest in tax and customs infrastructure modernization:
- The transition to behind-the-border taxation will require further investment by the global community in modernizing the tax and customs infrastructure of developing countries to adequately meet revenue needs in the digital era.
Implementation considerations
- Administrative ease favors VAT over tariffs for taxing digital trade.
- Modernization needs include strengthening domestic tax administration and customs systems to handle digitally traded products and ensure effective VAT collection.
Source: IMF Notes — Fiscal Revenue Mobilization and Digitally Traded Products: Taxing at the Border or Behind It?, by Tibor Hanappi, Adam Jakubik, Michele Ruta, September 7, 2023.
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