As the pandemic measures have halted commercial activities that require physical contact, some businesses have moved online in order to continue operating. As a result, e-commerce worldwide has spiked in the first quarter of 2020 as customers turned to the digital realm for their purchases. Meanwhile, governments around the world have stepped up to both enable and regulate this sudden transition.
For example, the Senegalese government is facilitating this transition and the delivery of essential supplies by fast-tracking the implementation of e-commerce policies and reforms. The country’s trade ministry has created an e-commerce platform that provides easy access to websites of small and medium-sized enterprises (SMEs) that sell essential goods.
Meanwhile, in Indonesia, where e-commerce is currently seen as a potential economic booster following the COVID-19 related economic crisis, the government is looking to tax online transactions. The introduction of taxes on transactions involving offshore e-commerce platforms is part of efforts to offset the economic impact of the pandemic in which the government has been accelerating planned tax reforms. The government forecasts a 10% decline in tax revenues this year due to measures taken to help businesses manage coronavirus-related losses. “Indonesia’s tax base will move towards digital taxation as online transactions have been growing significantly, especially during the COVID-19 pandemic,” stated Sri Mulyani Indrawati, the Indonesian minister of finance.
A full e-commerce ecosystem takes years to develop, requiring complex investments by the private sector and the implementation of governmental reforms. Public policy can facilitate digital trading by creating a regulated and informative environment in which digital entrepreneurship can thrive. Below are some key and general measures that governments can take in order to support businesses and households to connect to the digital economy in a clear and coordinated manner. These guiding measures are part of a recommendation paper formulated by the World Bank to help leverage e-commerce.
Develop a dedicated information website to support businesses that want to transition to e-commerce. The website should inform businesses how to transition to online as well the key steps they need to take to build their online presence and infrastructure (advertise online sales, decide how delivery and payment will take place, sell through existing e-commerce platforms, etc.). Such websites have already been created during the present pandemic, an example being the supporting website launched during Covid-19 in Italy.
Ensure an enabling regulatory framework for e-commerce. Fostering digital transactions requires a sound regulatory environment which might include digital signatures and documents, online consumer protection and data privacy. In middle- and high-income countries, regulations for doing e-commerce exist and the emphasis should be put on the effective use by businesses and the public. Where legal frameworks for digital trading are weak, as in most of the lower-income countries, the regulatory framework should be revised by looking at the necessary laws. However, addressing more structural obstacles or building a full-fledged regulatory framework for e-commerce might require a medium-term reform strategy.
Define the legal framework surrounding online delivery of professional services, particularly medical and other health services. Not all countries have a legal framework for the online delivery of professional services and, when one does exist, it may not be sufficiently clear. Legal frameworks need to be examined for each profession separately. For example, at least for the duration of the current pandemic, the White House administration, in the United States of America, has relaxed the restrictions for telehealth use as a way of continuing to provide remote healthcare to patients.
Educate the public, particularly families and micro-, small- and medium-sized enterprises (MSMEs) about how to stay safe when shopping or selling online, including basic cybersecurity measures. Education regarding potential online scams may be the most effective way to protect customers from becoming victims. When customers detect wrongdoing, they should be aware of where to go to report the case and, if necessary, seek redress.
Design fiscal policy measures that support the development of online sales channels. The fiscal policy for e-commerce should not disincentivize businesses from developing online sales channels. Tax frameworks should provide a transparent and administratively simple approach for the e-commerce sector to comply with tax obligations.
Establish an e-commerce working group. E-commerce falls at the intersection of many government ministries. Governments should therefore consider establishing a multi-sector working group consisting of government and private sector representatives.
Digital technologies are currently changing the landscape not only in the business sector, but in other areas of human activity. To review existing digital transformation funding opportunities in the international development sector, visit the DevelopmentAid website.
