Moratorium on Customs Duties for Electronic Transmissions: Implications for Bangladesh

Member states of the World Trade Organization (WTO) reached a consensus to continue the moratorium on imposing customs duties for electronic transmissions at the 13th Ministerial Conference (MC13) in 2024. The moratorium has been extended until March 2026 or until the convening of the 14th Ministerial Conference (MC14). 

Getting back to history, in 1998, WTO members introduced a temporary moratorium on imposing customs duties on electronic transmissions. This decision was made to encourage the growth of digital trade by keeping it free from trade barriers. The moratorium was introduced when policymakers were still uncertain about the potential impact of the internet and digital technologies on global trade. Recognizing their mission to liberalize trade in the interest of global economic development, WTO members agreed to temporarily refrain from imposing customs duties on “electronic transmissions”. The members also decided in parallel to create a work program for examining the trade-related issues of e-commerce to make recommendations for action. The temporary moratorium has subsequently been extended at each biennial[1]. 

It may be mentioned that electronic transmission applies only to services, not goods. Globally, electronically transmitted or digitally delivered services have experienced significant growth in recent years. In 2024, the global export of digitally delivered services reached USD 4.78 trillion, growing 10% year-on-year, while the total global export of trade in services amounted to USD 8.85 trillion. On the other side, global import of digitally delivered services totaled USD 3.98 trillion, with an 8% annual growth, while the global services import was USD 8.08 trillion[2]. 

From 2015 to 2024, both exports and imports of digitally delivered services have shown steady and significant growth globally. Exports increased from USD 2,170 billion in 2015 to USD 4,779 billion in 2024, more than doubling within a decade, with a compound annual growth rate (CAGR) of 8.21%. Imports rose from USD 1,970 billion in 2015 to USD 3,975 billion in 2024, reflecting robust expansion at a CAGR of 7.27%. 

The following table lists the top exporting countries and their respective import shares of digitally delivered services in 2024.

The table shows that global trade in digitally delivered services is highly concentrated. The USA leads with USD 741 billion in exports, accounting for 16% of the global share, followed by the UK (10%) and Ireland (9%). Germany (6% exports, 7% imports) and China (5% exports, 4% imports) demonstrate balanced but steadily growing participation. 

In 2024, Bangladesh’s export of digitally delivered services was USD 1.87 billion out of the total services export of USD 6.65 billion. While representing 0.04% of the world’s share, Bangladesh’s digitally delivered services export grew by 3% year-on-year. However, total services imports amounted to USD 11.31 billion, with digitally delivered services at USD 1.88 billion, while Bangladesh’s import of digitally delivered services accounted for 0.05% of the world’s share, increased by 9% year-on-year.

The table indicates that financial services represent the dominant component of Bangladesh’s import, contributing 44.4% of the country's total import of digitally delivered services, reflecting its high reliance on foreign financial services. Digitally Delivered Computer Services account for 21.3% of world export, but Bangladesh imports only 4.7% of  Digitally Delivered Computer Services of its total import.

The growth of digitally delivered services is driven by the rapid adoption of digital technologies, increased online activity post-COVID-19, and the borderless nature of digital trade. Services such as software, online courses, and freelancing can be exported easily without physical shipment, offering cost efficiency and new business opportunities. Additionally, the moratorium policy, which eliminates customs duties on electronic transmissions, has lowered trade barriers, encouraging both exports and imports of digital services worldwide. 

It is well known that Bangladesh has one of the lowest tax-to-GDP ratios in South Asia. A study by the NBR titled “Tax Expenditure Estimation in the Direct Tax of Bangladesh” revealed that widespread tax exemptions are a key reason for the low tax-GDP ratio in Bangladesh[3].  Digitally delivered services can be subject to customs duties. If the WTO moratorium on customs duties on electronic transmissions continues, Bangladesh could potentially lose significant tariff revenue from these imports, as customs duties constitute a significant share of 11% of its total tax revenue[4]. 

According to Banga (2022), between 2017 and 2020, developing countries (Argentina, Brazil, China, India, Indonesia, Singapore, etc.) and 12 least developed countries (LDCs) (Cambodia, Ethiopia, Rwanda, Senegal, etc.)  lost an estimated combined USD 56 billion in tariff revenue. Of this amount, developing countries lost accounting for USD 48 billion, while LDCs lost USD 8 billion. It is worth highlighting that the reduction in tariff revenue stems from imports of only 49 products at the six-digit HS level, many of which are luxury goods, including movies, music, related content, and video games[5].  While calculating the revenue impact, this study didn’t include Bangladesh. It is high time Bangladesh assessed the revenue impact due to the moratorium on electronic transmission. 

While the moratorium on electronic transmissions helps liberalize digital trade and benefits largely the developed countries by expanding market access, it also results in revenue losses for developing and least-developed countries, which rely heavily on customs duties as a source of government revenue. From the  perspective of trade justice, global trade must be fairer and equitable, and the moratorium on e-transmissions should be reconsidered to ensure that developing countries and LDCs do not face significant revenue losses. VAT could partly compensate, but may not fully replace customs-based revenue. The moratorium also restricts Bangladesh’s policy space for tariff instrument. Therefore, Bangladesh has fewer tools to nurture its emerging digital industries or protect them from global competition during their formative years.  This context requires adopting a balanced approach that addresses both revenue needs and the growth of the digital economy.

References

 [1]International Institute for Sustainable Development (IISD). (2024). Online tariffs? What the end of the e-commerce moratorium means for digital trade.IISD.https://www.iisd.org/taxonomy/term/6q=taxonomy/term/6&page=2#:~:text=Conscious%20of%20their%20mission%20to,e%2Dcommerce%20in%20view%20of

[2]World Trade Organization. (2025, July). Digitally delivered services trade dataset. WTO. https://www.wto.org/english/res_e/statis_e/gstdh_digital_services_e.htm

 [3]National Board of Revenue. (2024). Tax expenditure estimation in the direct tax of Bangladesh: Financial year 2021–22 (Revised ed.). Government of Bangladesh. https://nbr.gov.bd/uploads/publications/Tax_Expenditure_2021-2022_revised_31-12-2024.pdf

 [4]International Centre for Tax and Development (ICTD). (2022). The right to tax: Can customs duties on electronic transmissions be a turning point for developing countries? ICTD. https://www.ictd.ac/publication/the-right-to-tax-customs-duties-electronic-transmissions/

 [5]Banga, R. (2022). WTO moratorium on customs duties on electronic transmissions: How much tariff revenue have developing countries lost? (UNCTAD Research Paper No. 69). United Nations Conference on Trade and Development. https://unctad.org/system/files/official-document/ser-rp-2022d2_en.pdf