对跨境服务征税（英）

TaxingCross-BorderServices

ShafikHebous,BrendanCrowley,RasmiDas,TiborHanappi,CoryHillier,AdamJakubik,EricRobert,andChristophe

Waerzeggers

WP/26/152

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TheviewsexpressedinIMFWorkingPapersare

thoseoftheauthor(s)anddonotnecessarily

representtheviewsoftheIMF,itsExecutiveBoard,orIMFmanagement.

2026

JUL

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©2026InternationalMonetaryFundWP/26/152

IMFWorkingPaper

FiscalAffairsDepartmentandLegalDepartment

TaxingCross-BorderServices

ShafikHebous,BrendanCrowley,RasmiDas,TiborHanappi,CoryHillier,AdamJakubik,Eric

Robert,andChristopheWaerzeggers

AuthorizedfordistributionbyMarioMansourandAlessandroGullo

July2026

IMFWorkingPapersdescriberesearchinprogressbytheauthor(s)andarepublishedtoelicit

commentsandtoencouragedebate.TheviewsexpressedinIMFWorkingPapersarethoseofthe

author(s)anddonotnecessarilyrepresenttheviewsoftheIMF,itsExecutiveBoard,orIMFmanagement.

ABSTRACT:Facedwiththelimitationsofexistingtaxframeworksforcross-bordertradeinservices—

particularlythelackoftaxingrightsovercertainincomefromhighlydigitalbusinessmodelsandthecontinuingscopeforprofitshiftingthroughpaymentsforcross-borderservices—countriesandscholarshaveadoptedor

proposedawiderangeoftaxmeasures.Thispaperbringsthesemeasurestogetherinacoherentframework

andexaminesthemfrombothaneconomicandalegalperspective.Itdocumentshowcross-borderservices

tradehasgrown,becomemoredigitalincomposition,andbecomeincreasinglyconcentratedacrosssectors,

firms,andjurisdictions.Itthendevelopsacomparativesynthesiscoveringdestination-basedconsumption

taxessuchasVAT,gross-revenuetaxes—notablydigitalservicestaxes—aswellasincome-basedinstrumentssuchasnexusandwithholdingrules,andanti-avoidancerulesaimedatlimitingprofitshiftingthrough

deductiblecross-borderpayments.Thepaperarguesthattheeconomicincidenceofeachinstrumentiscentraltopolicyassessmentandthatevaluatingtheseinstrumentsinisolationobscurestheirinteraction.Itsmain

conclusionisthatbroaderrelianceondestination-basedtaxationcanaddressmanyofthecoreproblemsraisedbydigitalizedservicestrademoreeffectivelythannarrower,moredistortionaryalternatives.

RECOMMENDEDCITATION:HebousS.,Crowley,B.,Das,R.,Hanappi,T.Hillier,C.,Jakubik,A.,Robert,E.,andWaerzeggers,C.(2026).TaxingCross-BorderServices.IMFWorkingPaperWP/26/152

JELClassificationNumbers:

H22,H25,F13

Keywords:

DigitalServiceTaxes(DST);TaxPolicy;TradePolicy;DigitalEconomy;ServicesTrade

Author’sE-MailAddress:

shebous@;BCrowley@;rdas2@

;

thanappi@;CHillier@;AJakubik@

;

erobert4@;CWaerzeggers@

IMFWORKINGPAPERSTaxingCross-BorderServices

INTERNATIONALMONETARYFUND3

ExecutiveSummary

Cross-bordertradeinserviceshasgrownrapidly,withdigitallydeliveredservicesaccountingforanincreasingshareofthatgrowth.Theseservicescanbesuppliedremotely,atscale,andwithoutanyphysicalfootprintinthemarketcountrywheretheyareused.Thiscanmakeitharderfortraditionaltaxrules,whichoftenrelyonphysicalpresence,totaxprofitslinkedtosuchservicesinthemarketcountry.Valuecreationisalsoincreasinglylinkedtouserdataandmarketengagement,notonlytotheserviceitself.Evenwherephysicalpresenceexistsinthemarketcountry,related-partycross-

borderservicescanbedifficulttopriceatarm’slengthbecausereliablecomparablesareoftenlimited,creatingrisksofprofitshifting.

Asaresult,countriesincreasinglyfacetwoconnectedchallenges:howtotaxprofitsfromremoteservicessuppliedintotheirmarkets,andhowtoprotecttheirtaxbasefromdeductibleoutboundpaymentsforservices.

Intheabsenceofacomprehensiveglobalagreement,countrieshaveadoptedorconsideredarangeofunilateraltaxinstruments.Thecentralorganizingquestionofthispaperissimple:whatexactlyiseachinstrumenttryingtoachieve?

•Taxingfinalconsumption:Destination-basedVATisthemostcoherentandleastdistortionaryinstrumentamongthoseexamined.ModernVATsystemscanbringimporteddigitalservicesintothetaxnetthroughplace-of-supplyrules,simplifiednon-residentregistration,reverse-charge

mechanismsforbusinesspurchasers,andplatform-basedcollection.Thepolicyandlegaltaskiseffectiveimplementation.

•Taxingincomefromremotemarketparticipation:Themainunilateralinstrumentseachraisedistinctchallenges.

oDigitalservicestaxes(DSTs)attempttosourcerevenuetothemarketusinguserorcustomerlocation.However,theytaxgrossrevenuesratherthanprofitsandarethereforeinherently

distortionary.DSTsareselective—raisingchallengesofring‑fencing—andtheirincidenceisuncertain.EvidenceinthispapershowsthatDSTadoptionisassociatedwithreduced

digital‑servicesimports,consistentwithpass‑throughtoconsumersorbusinessusersratherthaneffectivetaxationoftheforeignprovider’sprofits.DSTsarelegallydesignedtosit

outsidethetraditionalscopeoftaxtreaties,amplifyingrisksofdoubletaxation.

oWithholdingtaxesandbroadsourcerulescanapplytooutboundpaymentsforabroadersetofservicesthanDSTsandworkbestwhenthereisaresidentpayeroridentifiable

intermediaryinthesourcejurisdiction.Theyarelesseffectivewhenthemarketconnectionisthelocationofusersratherthantheresidenceofthepayer.Withholdingtaxescanalsobe

distortionary,andmoreresearchisneededtounderstandtheirincidenceandrealeconomiceffects.Inaddition,withholdingtaxesareoftenrestrictedoreveneliminatedbytaxtreaties.

oExpandednexusrules,suchasdigitalpermanentestablishmentandsignificanteconomic

presencerules,seektobringremotemarketparticipationwithintheordinarynet-incometaxsystem.Butdeemingnexustoexistdoesnotresolvehowmuchprofitshouldbeattributedto

INTERNATIONALMONETARYFUND4

themarketjurisdiction.Withnolocalpersonnel,assets,orrisks,traditionalprofit-attributionrulesmayallocatelittleornoprofittothedeemedpresence.TreatyprovisionssuchasUNArticle12Bofferadifferentrouteforautomateddigitalservices:ratherthandeeminga

taxablepresence,theycreateasource-countrytaxingrightwithoutrequiringaPE.

•Curbingprofitshiftingthroughlimitsonotherwisedeductiblecross-border

payments:Transferpricingrules,deductionlimitationrules,divertedprofitstaxes,targeted

deemedPErules,andtreaty-basedprovisionssuchasUNArticles12A,12AA,andtheamendedroyaltiesarticleprimarilyaddressoutboundpaymentsandrelated-partyarrangements,often

functioningeconomicallylikewithholdingtaxes.Anti-avoidancerulesworkbestwhenthemarketconnectionistheresidenceofabusinesspayer,buteventhentheyremainimperfecttoolsfor

addressingstructurallimitsintheexistinginternationaltaxframework.

Acoreinsightofthepaperisthattheseinstrumentscannotbeevaluatedinisolation.Theirlegalscope,economicincidence,andbehavioraleffectsoverlapinwaysthatcaneitherreinforceor

underminepolicyobjectives.

Themainconclusionisthatbroaderrelianceondestination-basedtaxationwouldaddressthe

concernsraisedbydigitalservicestrademoreeffectivelythanthenarrowerandmoredistortionary

unilateralmeasuresthathaveproliferatedinitsabsence.Inaworldwhereservicescanbesupplied

globallywithoutphysicalpresence,taxsystemswillmostlikelycontinueshiftingtowardgranting

greatertaxingrightstomarketjurisdictionsratherthantotheplaceswherefirmshappentobe

located.Ifamultilateralsolutionisnotagreed,thelikelyoutcomeisamulti-playerlandscapemarkedbyoverlappingandinconsistentinstruments,increasingbothadministrativecomplexityandtheriskofdoubletaxation.

Contents

1.Introduction 7

2.WhatAreCross-BorderServicesandWhyDoTheyMatterforTax? 9

2.1EmpiricalRegularities 9

2.2TaxImplicationsofCross-BorderServices 16

3.VAT 20

3.1CoreVATLegislativeElements 21

3.2SpecificApplications 23

4.DSTsandRelatedLevies 25

4.1DSTs 25

4.2OtherRelatedTaxes:ExcisesandTransactionTaxes 29

5.TaxingCross-BorderServicesviaIncomeTaxes 31

5.1.ExpandingNexus:DigitalPEandSignificantEconomicPresence 32

5.2SourceRulesandWithholdingTaxesonCross-BorderServices 33

5.3Anti-Base-ErosionRulesandRelatedInstruments 35

5.4PossibleOverlap 36

6.Treaty-BasedResponsestoCross-BorderServices 37

6.1Article12A:FeesforTechnicalServices 38

6.2Article12B:AutomatedDigitalServices 39

6.3FromArticle12AandArticle12BtoArticle12AA 40

6.4AmendedArticle12:Royalties 41

6.5BroaderUNDevelopments 42

7.BringingthePiecesTogether 42

7.1AHolisticComparison 42

7.2ExcessBurdenofGross-BasisTaxesonCross-BorderServices 43

8.ConcludingRemarks 426

AnnexI–DigitalTradeProvisionsinNewU.S.AgreementsonReciprocalTrade 52

AnnexII–KeyDesignFeaturesofDSTs 53

BOXES

1.WTOMoratoriumonCustomsDutiesonElectronicTransmissions 19

2.TheDestinationPrincipleforDSTsandVAT:TheExampleofOnlineAdvertising 53

FIGURES

1.TrendsofCross-BorderTradeinServices 10

2.TheEvolutionofCross-BorderTradeinBusinessServices 11

3.DomesticValueAddedandImportRoutinginITandComputerServices 13

4.BilateralDigitalServicesFlows 15

5.ServicesbyModesofSupplyandSector 13

6.TheShiftfromImportsofPhysicalGoodstoElectronicallyDeliveredProducts 16

7.MainTaxInstrumentsforCross-BorderServices 17

8.SimpleServiceTransactionTaxonomyforTaxAnalysis 18

9.VATTreatmentofCross-BorderSuppliesofServices 20

10.PotentialRevenuefromEffectiveVATonDigitalServices 23

11.EstimatedEffectsofDSTsonDigitalServicesImports 27

12.DSTRevenueasaShareofTotalTaxRevenue,SelectedCountries 29

6

TABLES

1.EconomicLogic,Scope,andLimitsofTaxInstrumentsforCross-BorderServices 44

2.CoverageofDigitalServicesinFinalizedU.S.AgreementsonReciprocalTrade 49

3.KeyFeaturesofDSTs 50

7

1.Introduction

Cross-borderserviceshavebecomeoneofthemostimportant—andmostdifficult—frontiersin

internationaltaxation.Therulesthatallocatetaxingrightsacrossjurisdictionswerelargelydesignedforaverydifferentworldeconomy:oneinwhichtradewasdominatedbygoods,cross-border

transactionsweremorelimited,andforeigndirectinvestment(FDI)oftenplacedproductionclosetofinalmarkets.Thatworldhaschangedprofoundly.

Overthepasttwodecades,tradeinserviceshasexpandedrapidlyandnowaccountsforroughly

one-fifthtoone-quarterofglobaltrade,withdigitallydeliveredservicesgrowingespeciallyquickly.Theorganizationofmultinationalproductionhasalsochanged.Themultinationalenterprise(MNE)hasevolvedfromacollectionofnationalaffiliates,eachlargelyservingitslocalmarket,intoamoreintegratedglobalfirminwhichentitieswithinacomplexownershipstructureperformspecialized

functionsforthegroupasawhole(Hebous,2021).Intangibleassets—andtherelatedcross-borderpaymentstheygenerate,includingrelated-partyroyaltiesandservicefees—havebecome

increasinglycentraltovaluecreationandprofitallocationacrossjurisdictions.In2024,servicesaccountedfor27.2percentofworldtrade,theirhighestsharesince2005.

Theinternationaltaxframeworkhasnotadjusted—certainlynotatthesamepace.Since1928,the

treaty-basedsystemsettinginternationaltaxnormshasrestedonthepremisethatthebusiness

profitsofanon-residententerprisearetaxableinajurisdictiononlyiftheenterprisehasasufficientphysicalpresencethere,typicallyintheformofapermanentestablishment(PE).Thesame

frameworkgenerallyallocatesbroadersource-countrytaxingrightsoverpassiveincomethanover

activebusinessprofits,althoughtreatiesalsolimittheuseofwithholdingtaxesonoutbound

payments.Thishasincreasedtheattractionofusingthoseremainingsource-basedtoolstoreach

businessincomethatwouldotherwisefalloutsidetheordinarytreaty-basedPEframework.These

rulesweredevelopedwhenphysicalpresencewasaplausibleproxyformeaningfulparticipationinamarket,orinajurisdictionmoregenerally,andwhereclearerdistinctionscouldbedrawnbetween

businessprofitsandpassiveincome.Thatisnolongeralwaysthecase.

Firmscannowsupplyadvertising,cloudcomputing,consulting,streaming,software,intermediation,andmanyotherservicesintoajurisdictionatscalewithoutestablishingalocalbusinesspresence

.1

Thishasintensifiedonestrandofthedebateoncross-borderservicestaxation:growingreluctancebycountriestolimitorentirelyforgotaxingrightsoverincomelinkedtotheirdomesticmarkets,

users,consumers,anddata.

Atthesametime,evenwherealocalpresenceexists,cross-borderservicesandintangiblesareoftendifficulttopricebecausereliablecomparablemarketpricesarelacking,creatingscopeforprofitstobeshiftedoutofmarketjurisdictionsthroughdeductiblepayments

.2

Thisreflectsasecond,more

1‘Localbusinesspresence’isusedbroadlyheretorefertoanon-residentfirm’spresenceinajurisdictionthrougheitheraPEoralocallyincorporatedsubsidiary.

2Forempiricalevidenceonprofitshiftingthroughrelated-partyservicetrade,seeHebousandJohannesen(2021)andGarcia(2024).Thereisalsoevidencethatpatentlocationrespondstotaxplanningopportunities,whichinturn

influencescross-borderroyaltyflows(Accotoetal.,2024;Alstadsæteretal.,2018;Lejourandvan’tRiet,2025).

8

longstandingconcern:theerosionofthedomestictaxbasethroughrelated-partycross-borderservicepaymentsthataredifficulttovalueandeasytoshiftacrossjurisdictions

.3

Thesetwoconcerns—theinabilitytotaxincomewithoutalocalbusinesspresence,andtheuseof

cross-borderservicestoshiftprofitsacrossjurisdictions—have,inturn,generatedaproliferationof

taxinstruments.Someareintendedprimarilytoestablishtaxingrightsovercross-borderservices

suppliedintoamarketwithoutasufficientlocalpresence;othersseekmainlytocurbbaseerosion

throughdeductiblepaymentsforservices,intangibles,andrelatedintragroupservicecharges.Yetthedistinctionisnotalwaysclear-cut.Insomecases,differentinstrumentsreachrelatedorevenidenticalflows—whetherintentionallyorunintentionally—whiledifferingintheirlegaldesignandinthe

economicincidenceofthetaxburden.

Thispaperexaminestheprincipaltaxmeasuresandlegalapproachesusedorproposedfortaxing

cross-borderservices,focusingontheirscope,legaldesign,economicproperties,andbroader

implications,whileabstractingfrommorefundamentalreformsthatcouldinprincipleaddressthesetensionsmorecomprehensively

.4

Itbeginsbydocumentingasetofempiricalregularitiesoncross-borderservices,withparticularattentiontothemagnitudesinvolvedand,wherepossible,totax-

relevantdistinctionsacrossbusiness-to-business(B2B)andbusiness-to-consumer(B2C)services,modesofsupply,andmajorinternationalpatternsindigitalservices(Section2).

Section3examinesVAToncross-borderservices,whichhasbecomeakeycomponentofVAT

modernization.Section4turnstodigitalservicestaxes(DSTs)—selectivetaxesongrossrevenuefromcertaindigitalservices—whichgainedprominenceamidfrustrationwiththelimitedprogressof

multilateralreform.Inparticular,PillarOneoftheOECD/G20InclusiveFrameworkwasintendedtoreallocateashareoftheresidualprofitsofthelargestmultinationalenterprisestomarket

jurisdictionsand,aspartofthatpackage,tosecuretheremovalofexistingDSTsandastandstillonnewones.ButPillarOnehasstalled,whiletheunderlyingtaxissuesremainunresolved

.5

Section5examinessource-basedincometaxrules,nexusandsubstancerequirements,andanti-

avoidancemeasuresaffectingcross-borderservices.Section6discussestreaty-basedproposals,

includingprovisionsdevelopedundertheUnitedNationsModelConvention—notablyArticle12Aonfeesfortechnicalservices,Article12Bonincomefromautomateddigitalservices,andArticle12AA

oncross-borderservicefeesmoregenerally,aswellastheamendedroyaltiesarticle.Section7bringsthemaininstrumentstogetherincomparativeperspective.Section8concludes.

3Thepaperfocusesonlyonprofitshiftingthroughcross-borderservices.BEPSconcernsextendwellbeyondthe

mispricingofsuchservices,andthebroaderreformagendaismultifaceted,includingtheOECD/G20baseerosionandprofitshifting(BEPS)packageagreedin2015andthe2021agreementonaglobalminimumtax(PillarTwo).Thesewiderissuesareoutsidethescopeofthispaper.Fordiscussion,see,forexample,IMF(2019,2023).

4Fordiscussionofmorefundamentalreformstocorporatetaxation,includingdestination-basedoverhaulsofthetaxsystem,seeDevereuxetal.(2021)andKlemm,deMooij,andHebous(2026).

5ThisreallocationoftaxingrightstomarketjurisdictionsisreferredtoasAmountAofPillarOne.Itisintendedtobeimplementedthroughamultilateralconvention,whichwouldneedtobesignedandratifiedbyacriticalmassofjurisdictionsbeforeenteringintoeffect;atpresent,thatprospectremainshighlyuncertain.Itsscopeisalsonarrowcoveringfewerthan100multinationalgroupsandlessthan2percentofglobalprofits(IMF,2022).

9

2.WhatAreCross-BorderServicesandWhyDoTheyMatterforTax?

Cross-bordertradeinservicesencompassesabroadrangeoftransactionsinwhichservicesare

suppliedacrossjurisdictions.Suchtradediffersfromgoodstradeinseveralimportantrespects:itisoftenlessvisibleattheborder—orindeedlesssubjecttobordercontrol—,canbedeliveredthroughmultiplemodesofsupply,andincludesactivitiesasvariedastourism,transport,finance,consulting,intellectualproperty-relatedtransactions,anddigitallydeliveredservicessuchassoftware,cloud

computing,onlineadvertising,andonlineintermediation.

Digitalservicesarebestunderstoodnotasawhollyseparatecategory,butasvariousservices

suppliedremotelythroughelectronicnetworks,oftenatscaleandwithoutrequiringthesupplieroranypersonrelatedtoittohavealocalpresenceinthemarketjurisdiction.Assuch,theymayoverlapwithotherservicecategoriesmentionedabove:forexample,management,consulting,andtechnicalsupportservicesmaybedigitallydelivered,whereaspaymentsfortheuseofintellectualproperty,

suchasroyaltiesfortrademarksorotherrights,aremoreappropriatelytreatedasIP-relatedpaymentsevenwheretheyarisewithinadigitalbusinessmodel.

Cross-borderservicetransactionsarerecordedinthebalanceofpaymentsasserviceexportsand

imports.Someoftheseservicesarepurchasedbyfinalconsumers,whileothersareacquiredbyfirmsasintermediateinputstoproduction,orariseasrelated-partypaymentswithinmultinational

enterprisegroups.Thediscussionthatfollowshighlightsasetofempiricalregularitiesthathelpcharacterizethescale,composition,andtax-relevantdimensionsofcross-borderservicestrade.

2.1EmpiricalRegularities

Observation1:Cross-borderservicestradehasexpandedsteadily,withthestrongestgrowthinhigh-incomeeconomies.Overthepasttwodecades,cross-borderservicestradehasincreasedsubstantially,reaching16percentofworldGDPin2024

(Figure1,

panelA).Inhigh-income

economies,theratiooftotalservicestradetoGDProsefromabout11percentin2005tonearly18percentin2023

(Figure1,

panelB).Bycontrast,middle-incomeeconomiesexperiencedmuchlessexpansion

.6

Whiledigitalservicesasacategoryarenotdirectlyobservedinthedata,digitally

deliverableservicesprovideausefulproxy

.7

Inhigh-incomeeconomies,thiscategoryrosefromroughly5percenttonearly11percentofGDP

(Figure1,

panelC).

6BecausetheseriesareGDP-weighted,theupper-middle-incomeaggregateisheavilyinfluencedbyChina,whose

shareofgroupGDPrisesfromabout39percentin2005to67percentin2019;excludingChina,thegroup’s

services-to-GDPratiowouldbeabout11percentin2023,ratherthanthereported7percent.Thelow-income

aggregateisbasedon10–13economieswithnon-missingdatainagivenyear(outof15–16inthesample).Its

year-to-yearvolatilityisdisproportionatelyaffectedbyMozambique,whoserecordedservicestradeexhibitslargefluctuationsrelatedtonatural-resourceprojectflows.

7SeeWTOandothers(2023),Chapter4,Figure4.5.Theseinclude,forexample,financialservices,informationservices,computerservices,telecommunicationsservices,andpersonalservices.

10

Figure1.TrendsofCross-BorderTradeinServices

(a)Globaltrade(b)Servicestradebyincomegroup(c)Digitallydeliveredservices

55

50

45

40

35

30

25

20

15

10

5

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2

1980

1984

1988

1992

1996

2000

2004

2008

2012

2016

2020

2024

0

Goodstrade(%ofGDP)Servicetrade(%ofGDP)

Source:PanelA:WTO,IMFWEO,andauthors’calculations.PanelB:WorldBankWorldDevelopmentIndicators.PanelC:OECD–WTOBalancedTradeinServices(BaTIS).InPanelA,servicestradedatafollowingtheBPM6definitionbeginin2005andexcludeMode3(foreignaffiliatesales).InPanelB,servicestradeiscomputedasthesumofservicesexportsandimportsdividedby

nominalGDP,withallvariablesmeasuredincurrentU.S.dollars.InPanelC,servicesaremeasuredusingOECD–WTOBaTIS,

filteredfordigitallydeliverableservices(WTOandothers,2023).SIvalues,reportedinmillionsofU.S.dollars,arerescaledby106beforedivisionbyWDInominalGDPtoalignunits.Income-groupclassificationfollowstheWorldBank2023Atlasmethod:high

income,upper-middleincome,lower-middleincome,andlowincome.SeriesareGDP-weightedaggregates:numeratorsand

denominatorsaresummedseparatelywithineachincomegroupbeforedivision,consistentwithWorldBankWDImethodology.Thedipin2020reflectsCOVID-19disruptionstotravelandtransportservices,whichdominatetheall-servicesaggregatewhiledigitallydeliveredservicesshowninPanelCwerelessaffected.

Observation2:Thecenterofgravitywithinservicestradehasshiftedtowardbusinessservices,withthedigitalcomponentbecomingincreasinglyimportant.Businessservices—combiningIP

charges,computerservices,andotherbusinessservices—havebeenakeydriveroftheexpansionofservicestrade.Theyaccountedforroughly32percentofglobalservicesimportsin2005and,by

2023,hadreachedaboutUS$3.2trillion,whiletravelandtransportrecoveredonlypartiallyafterthepandemicshock

(Figure

2).Withinbusinessservices,themoredigitallyintensivecomponent—

proxiedherebycomputerservices—hasbeenthemostdynamic:by2023,computerservicesimportshadrisenbyafactorof5.4relativeto2005,comparedwithroughly3.8forbusinessservicesoveralland2.8forIPchargesandroyalties(notshown).

11

Figure2.TheEvolutionofCross-BorderTradeinBusinessServices

Source:OECD-WTOBalancedTradeinServices(BaTIS),usingtheExtendedBalanceofPaymentsServicesClassification

(EBOPS)2010classification.Categories:Businessservices(SH+SI+SJ);Travel(SD);Transport(SC);Financialservices(SG);Other(residualoftotalservicesminustheabove).Aggregatedacrossallreportingeconomiesforwhichatleastonebilateralflowisrecordedinagivenyear;valuesinUSDbillions.Leftpanelshowsimportlevels;rightpanelshowseachcategory'sshareoftotal

servicesimports(summingto100%ineachyear).Thesharpcontractionintravel(SD)andtransport(SC)in2019–2020reflects

COVID-19borderrestrictions.Businessservices,whicharelessdependentonphysicalmobility,maintainedtheirupwardtrajectorythroughout.

Observation3:Asignificantshareofdigitalservicestradeisrecordedthroughconduit

jurisdictions.Adisproportionateshareofdigitalservicesimportsissourcedfromasmallgroupofjurisdictions

(Figure

3).Acrossadvanced,emerging,anddevelopingeconomies,between21and31percentofdigitalservicesimportsarerecordedthroughthesesevenjurisdictions,withtheshare

risingfromabout21percenttonearly29percentbetween2005and2023.Ontheexportside,thesesamejurisdictionsalsoappearfarmoredigitallyintensivethantherestoftheworld:by2023,digitalservicesaccountedforroughly18–19percentoftheirservicesexports,comparedwithabout9

percentelsewhere.Trade-in-value-addedstatisticsalsosuggestthatsomeofthejurisdictions

recordingthelargestdigitalservicesexportsretainrelativelysmalldomesticvalueadded.For

example,domesticvalue-addedsharesinIT-sectorexportsare24–38percentinsomeofthese

jurisdictionscomparedwith85percentormoreelsewhere.Overall,thispatternisconsistentwiththebroaderevidencethatinternationaltradeinservicesisconcentratedinasmallnumberof

jurisdictions(HebousandJohannesen,2021).

12

Figure3.DomesticValueAddedandImportRoutinginITandComputerServices

Source:OECD–WTOBaTISbilateraldata,EBOPSSI(computerservices),andOECDTradeinValueAdded(TiVA),EXGR_DVASHforISICRev.4sectorsJ62–63.Thesevenjurisdictionswiththelowestdomesticvalue-addedshareinIT-sectorgrossexportsare

identifi