Emerging issues for fair trade and taxation of virtual goods

23 October 2013 - A Workshop on Access in Bali, Indonesia

Organizer Name 

Peake Adam

Organizer Entity 

GLOCOM

Workshop Theme 

The Internet as an Engine for Growth and Advancement

Consise description 

 

 

Emerging Issues for Fair Trade and Taxation of Virtual Goods

 

The Internet as an open and level economic platform for the international trade in 'intangibles' is explored by discussing the latest trends in the trade, and taxation, of virtual goods.  We will discuss the future of online commerce relying on the trade of intangibles, and how Internet policy and governance can effect such international trading.

 

Direct Monetization of Virtual Goods Banned

The phenomenon of trading virtual goods[1] on the Internet, for real money, is expected to reach a worldwide market of USD$ 20 billion by 2015[2]. The controversial trading of these intangible, non-physical objects, by international communities of users that number in the tens of millions, often employ the use of virtual currencies that are outside existing systems of money; and also outside the international system for trade in tangible goods and services. Indeed the practice of direct monetization of these 'intangibles', through Internet-based social games, has now been banned both in Japan[3] and South Korea[4] (bans imposed during 2012).

 

Value and Trade in Other Intangibles Emerging

 

At the same time, recent changes in the 'System of National Accounts' [5] appear to better reflect how the investment in developing intellectual property(IP) 'intangibles' may indeed be larger than traditional investments in tangible goods in some economies (e.g. the U.K.). Furthermore, that better measurement of the value of 'intangibles' might better inform policy making to drive economic growth. With some economies establishing IP Trading platforms (e.g. HK) [6] and Digital Copyright Exchanges [7] and several economies experimenting with new forms of Internet-aware copyright licences (e.g. Creative Commons).

 

Changing Nature of Money and Payment

 

Furthermore Internet-aware cryptographic currencies (e.g. Bitcoin) are emerging, together with open web-payment standards for the Web (e.g. Payswarm) and the global standardization work being done by W3C and others.

 

This high-level international discussion of the trade in virtual goods addresses four broad themes:

 

1. Appropriate regulatory regimes and modalities: TISA, WTO GATS, TRIPS Other

2. Micro-settlements, micro-taxation: Taxation, Laundering and Theft.

3. Intellectual Property (IP), End-User Licence Agreements: Value, Liability and Property

4. Jurisdiction and principles of territoriality: Settlement, Tariffs, and Scaling

 

A goal is to use this IGF session to identify emerging issues in the trade of intangibles and to bring them to the attention of the Ninth World Trade Organisation (WTO) Ministerial Conference (Bali, Indonesia, 3-6 December 2013), to help ensure that no country/stakeholder group is disadvantaged from the trade in virtual goods and the opportunities of emergent digital trading hubs.

 

The round-table will build on a session held at the Asia Pacific Regional IGF (APrIGF), Seoul September 3-6 September 2013 that will discuss the matters arising from last year's ban on direct virtual goods monetization in South Korea and Japan.

 

Challenges presented via background papers are:

 

A) Fair Trade in Intellectual Property: digital copyright exchange, value of new licensing regimes (e.g. creative commons), value of intangibles, exchange of digital assets (inc. protection of heritage, piracy, other crime).

 

B) Crypto-currencies and digital money: regimes to address settlements, taxation, laundering, safeguarding consumer confidence and trust in a global regime.

 

C) Relationship between open Internet and open trade.

 

D) Issues of jurisdiction: settlement, tariffs, taxation, liability, and scaling.

 

Remote links to authors and other experts will support the session.

 

References:

 

[1] http://en.wikipedia.org/wiki/Virtual_goods

[2] http://www.nytimes.com/2012/10/05/technology/next-wave-of-asian-exports-to-us-may-be-virtual-goods.html?_r=0

[3] http://www.techinasia.com/japanese-consumer-affairs-agency-kompu-gacha/

[4] http://www.koreatimes.co.kr/www/news/tech/2012/06/129_112964.html

[5] http://unstats.un.org/unsd/nationalaccount/sna2008.asp

[6] www.hkipx.com, www.ipexc.com, www.hkipex.com.hk , www.ipexchub.com

[7] http://www.copyrighthub.co.uk/

 

 

Agenda 

Peter Cheung, Hong Kong, China's Director of Intellectual Property and Tony Clayton, Chief Economist of the UK Intellectual Property Office, will make short presentations framing the issues surrounding the economic role of the global trade in intangible assets and how it can be measured to inform policy. 20 minutes Each speaker will respond to the presentations from their practical personal experience: developing open technical standards for integrated web payments; online gaming communities creating and trading virtual goods; encouraging domestic and global Intellectual Property(IP) trading and copyright exchanges; and connecting trade regulation, negotiation, taxation with copyright enforcement. Moderated discussion, maximum 40 minutes 30 minutes open discussion and questions from the audience.

Moderator 

Pindar Wong

Remote Moderator 

Adam Peake

Have you organized workshops at previous IGFs?

No

Workshop format 

Panel

Workshop Transcript 

Transcript

Brief substantive summary of the workshop and presentation of the main issues that were raised during the discussions 

 

This workshop built on the 2013 IGF theme of, 'Building Bridges' by identifying emerging issues (Tunis Agenda s.72.g pg 12) in three international ecosystems: the International Trade Ecosystem, the International Financial Ecosystem and the Internet Governance Ecosystem. This workshop explored the fundamental opportunities provided by the emergence of Internet-enabled trade in 'Virtual Goods', the fundamental challenges having already been explored in an earlier workshop held at the Asia Pacific Regional Internet Governance Forum in Seoul on Sept 5th 2013.

 

The scene was set by two new IGF participants, from the HK and UK governments, and well versed in Intellectual Property(IP) trade development. They successfully participated remotely, and provided a conceptual backdrop by discussing their experience in developing efficient markets for the trade in such 'intangible assets' and measuring their economic impact. This was followed by observations and discussion about user and consumer rights in any new trade framework in digitized goods, technical developments in routing money on the Internet to settle such trade, and the need for much closer engagement with the existing multilateral system of trade negotiations such as the World Trade Organization (WTO).

 

 

Conclusions drawn from the workshop and further comments 

 

t would appear that there was interest to explore further the cross-border issues that clearly impact the rights of end users and consumers in this new form of trade on the Internet. Some of these issues stem from the technology and policies needed to establish a global standard for Web Payment. The World Wide Web Consortium (W3C) standards work in this area was attractive and may require further explanation and policy development at a future IGF as a standalone topic.

 

It was clear however, that time was extremely limited and it was not possible to explore, to any satisfactory depth, this new topic.

 

One of the panelists will be participating in the Ninth WTO Ministerial Conference in Bali this December, and will convey the need for closer collaboration with the Internet Governance Forum community.

 

Recommendations: Formal Presentations should all be pre-recorded, delivered and watched prior to the IGF. Such that there is a better opportunity for detailed discussion by the many other IGF experts present in the room. Not making use of such unique expertise is wasteful.

 

Note: The moderator, who was new to the IGF, did not keep detailed statistics on participation, not did he circulate a sign-up sheet therefore he was unable to complete the required statistics below.

 

Reported by 

Pindar Wong: pindar.wong@gmail.com

Estimate the overall number of women participants present at the session 

About half of the participants were women

To what extent did the session discuss gender equality and/or women's empowerment? 


It was not seen as related to the session theme and was not raised

Discussion affecting gender equality and women's empowerment 

 

Workshops Staticals 

Number of FEMALE participantsNumber of MALE participantsNumber of Young participantsNumber of Developing Countries ParticipantsNumber of Developed Countries ParticipantsNumber of LDCs participantsNumber of TOTAL Participants
0 0 0 0 0 0 0