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arXiv · 2611.05714

The potential impact of fiscal rule changes on digital products trade

Sonja Mitikj·Viktor Stojkoski
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Abstract

The WTO moratorium on customs duties on electronic transmissions lapsed in March 2026, allowing governments to impose tariffs on cross-border digital products, alongside other instruments such as digital services taxes (DSTs). Yet, how tariffs and DSTs compare in the revenue they raise and their effect on trade in digital products has not yet been assessed. Here we combine bilateral trade in 31 digital product categories in 2016-2024 with DST rates and tariffs on physical analogues, estimate gravity models and simulate alternative fiscal regimes. We find that digital trade is lower in destinations with a DST, but within destinations it declines only temporarily after adoption. In conditional scenarios for 2024 based on the event study estimate, adding tariff equivalents to DSTs raises revenue from USD 2.7 to 6.9 billion and lowers trade by about 1.4%, and replacing DSTs with tariff equivalents raises USD 4.3 billion. We also find that tariff-equivalent payments are attributed mainly to the United States and DST payments to subsidiary locations such as Ireland. In sum, these results suggest that tariffs on digital products could raise more revenue than DSTs at a modest cost in trade.

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Sonja Mitikj, Viktor Stojkoski. 2026-11-03. The potential impact of fiscal rule changes on digital products trade. https://arxiv.org/abs/2611.05714

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