The boundary between digital goods and E-services in cross-border E-commerce and implication for non-discrimination under the WTO system

Abstract

Abstract One of the biggest challenges of implementing value-added tax (VAT) collection on cross-border digital goods and services is the compliance with World Trade Organization (WTO) obligations. The lack of a clear distinction between goods and services in the WTO agreements and divergent classifications adopted by states have led to fragmented and inconsistent VAT collection, potentially creating trade barriers in international e-commerce. This article analyses various approaches to classify goods and services including technological neutrality and tradability. It also uses the modernization of Thailand’s VAT system as a case study to demonstrate the complexity of categorizing digital goods and services for VAT enforcement in international e-commerce. It finds that technological neutrality and tradability are key criteria to separate digital goods from e-services for the proper implementation of WTO obligations. The article concludes with remarks on the correlation between categorizing digital goods and services in VAT collection and protectionism in cross-border e-commerce.