Will there be tax on Netflix movies and software? ‘Digital war’ breaks out on e-commerce tariffs: – ..

The high-profile meeting of the World Trade Organization (WTO) going on in Yaounde, Cameroon has currently turned into a big diplomatic arena. The world’s two biggest economies, India and America, are at loggerheads over digital trade and e-commerce tariffs. The root of the controversy is the 30-year-old rule that keeps digital transactions ‘tax free’. Now the question is, will you have to shell out more in future to download your favorite movie or buy software?

What is the ‘Tax Free’ controversy and why is it creating a ruckus?

An agreement has been in force at the global level for the last three decades, under which no country imposes custom duty on things sent through digital medium (such as e-books, Netflix movies, gaming apps and software). This discount is ending this month. America, which is home to giant companies like Amazon, Microsoft and Apple, wants this tax exemption to be made ‘permanent’. At the same time, India’s Commerce Minister Piyush Goyal has expressed the need for ‘serious reconsideration’ on this. India argues that due to this exemption, developing countries are losing tax revenue worth crores of rupees.

India’s ‘middle path’: Washington adamant on permanent solution

On Friday night, Indian diplomats tried to break the deadlock by giving an important signal. India may agree to extend this ‘moratorium’ (tax moratorium) for the next 2 years, but it is strongly against ending it forever i.e. making it ‘permanent’. On the other hand, US Trade Representative Jameson Greer has bluntly said that Washington is not interested in any temporary expansion, but only in a permanent solution. For America, this decision is ‘the easiest and most important’, while India is looking at it by linking it to its sovereignty and revenue.

Fear among tech companies, shadow of uncertainty looms over investment

Big tech companies around the world fear that if this agreement ends and countries start imposing taxes on digital products, then doing business will become extremely complicated. According to Microsoft Director John Besek, uncertainty in the digital economy means less investment. Business leaders believe that imposing duty on digital trade will not only increase costs but will also have a negative impact on the global supply chain, which is already under stress due to the war in the Middle East.

WTO’s credibility at stake: What will be the solution?

This meeting in Yaounde has now become a test of WTO’s existence. While African and Caribbean countries are suggesting an extension of 2 years, some countries are trying to find a middle path of 5 to 10 years. Norway’s Foreign Minister says that extending this moratorium is essential to save the credibility of WTO. If no concrete decision is taken here, a major imbalance may arise in the global digital economy.