The Moratorium on Customs Duties for Electronic Transmissions

The World Trade Organisation (WTO) agreed on a moratorium on customs duties for electronic transmissions back in 1999. This agreement must be renewed every 2 years and was due to go before the Ministers last year, but, due to COVID, that meeting was postponed. The 12th Ministerial Conference (MC12) will take place on 12-15 June 2022 at WTO headquarters in Geneva, but getting the unanimous agreement needed to renew the moratorium seems most unlikely. It now looks as if a majority of WTO members will agree bilaterally among themselves, while those countries not in agreement (lead by India, supported by SA) will be free to impose customs duties on electronic transmissions. What will this mean?

First, it is important to keep in mind that this issue has to do with customs tariffs – not VAT. Tariffs/duties vary widely depending on the product imported. A country could set its customs duties/tariffs for electronic transmission as luxury goods (which can attract tariffs at 50% or more) or it could consider electronic transmissions as an essential product with tariffs at around 10%.

The big debate has been on what is electronic transmission. Some countries have identified these as any product which is carried by electronic transmissions from abroad. This would mean any/all the following products from abroad would not only have VAT charged on them but would also be subject to a customs tariff: – software, downloads of entertainment and music, online education or training, online games, 3D printing instructions, financial transfers, cloud storage, etc. According to UNCTAD at present developing countries are losing billions of dollars in customs revenues by not charging tariffs on these products.

However, other experts point out that most of these products are already taxed, and customs tariffs also are applied. Therefore, the moratorium would only apply to the cost of the actual data crossing national borders. Such data is not expensive (for example, how much does it cost you to upload a computer programme coming from another country? We’re talking in terms of a couple of Rands). We have asked the Finance Ministry for their interpretation but received no reply.

The other problem is how SARS would collect such tariffs. EFSA has argued that this could only be done if the telecoms collaborated with SARS to allow SARS access to ascertain data flows from abroad. This cost would be passed on to the consumer, adding to inflation.