Strengthening fiscal revenues in developing countries in the context of electronic commerce and digital trade

Expert recommendations prepared under the responsibility of the Co-Chairs:

1. With digital services and cross-border transactions leading to potential revenue leakage, administrative bottlenecks and competitive distortions, developing countries could consider the following approaches, tailored to their specific capacities:
   1. Modernize tax legislation by integrating both indirect and direct taxation strategies, such as adopting the destination principle for value added tax and goods and services tax and exploring specialized direct tax measures for the digitalized economy;
   2. Simplify registration thresholds for non-resident digital suppliers, to ensure broader compliance and facilitate the expansion of the tax base;
   3. Review de minimis thresholds and relevant nexus rules, to safeguard fiscal revenues without stifling trade;
   4. Strengthen tax administration by integrating digital solutions, such as electronic invoicing (e-invoicing), simplified reporting systems and automated anomaly detection, to improve enforcement capacity and reduce reliance on manual, paper-based processes, while ensuring cybersecurity and data protection;
   5. Leverage digital platforms as tax intermediaries with appropriate legal frameworks for data-sharing and tax collection on behalf of resident and non-resident suppliers;
   6. Promote the inclusive formalization of micro-enterprises and small and medium-sized enterprises through simplified digital registration processes and access to digital public infrastructure, such as digital identity systems, interoperable payment platforms and e-invoicing tools, thereby expanding the tax base and facilitating compliance;
   7. Enhance collaboration between tax authorities and customs authorities, as well as with regional and international partners, to harmonize procedures, reduce compliance costs and strengthen capacity for the effective taxation of digital trade;
       
2. UNCTAD should continue to produce analysis, as well as promote and facilitate discussions, on the challenges faced by developing countries in their capacity for generation of public revenue, in view of the digital transformation process and in order to foster international cooperation on this subject (Geneva Consensus (TD/561/Add.2, paragraph 80.45)). In this context, consideration should also be given to UNCTAD in-house expertise, such as through its work on e-trade readiness and the Automated System for Customs Data (ASYCUDA). Recognizing that the taxation of e-commerce and digital trade is inextricably linked to broader digitalization, regional bodies and the international community should address the structural challenges faced by developing countries by:
   1. Fostering South–South and triangular cooperation, to build collective resilience and shared technical standards;
   2. Providing targeted sustained capacity-building and technical assistance, to help developing countries bridge the digital divide and participate meaningfully in the global digital economy;
   3. Scaling-up targeted technical assistance by deploying practical digital tax toolkits, including guidance from the United Nations Committee of Experts on International Cooperation in Tax Matters and policy assessments tailored to the infrastructure and capacity constraints of developing countries, to ensure fair, balanced, inclusive and development-oriented tax frameworks;
   4. Promoting regional harmonization and cooperation by supporting regional tax associations in their efforts to align registration requirements and compliance procedures, thereby reducing the burden on cross-border traders and simplifying enforcement for smaller administrations;
   5. Facilitating knowledge-sharing through continued exchanges of best practices on the role of digital platforms in tax collection, ensuring that policy design remains adaptive, inclusive and evidence-based in response to rapidly evolving digital business models;
   6. Addressing barriers that restrict developing countries, particularly the least developed countries, in participating in the digital economy.