The unprecedented growth of trade in digitized products has been underpinned by the World Trade Organization (WTO) moratorium on customs duties on electronic transmission, which effectively guarantees the tariff-free nature of this trade. Some countries fear that the current rules inefficiently constrain their policy space and hurt their revenue potential, and have argued for scrapping the moratorium. We examine the optimal role for domestic and border tax instruments in this context. We show that, independently of the future trajectory of trade in digitized products, broad-based nondiscriminatory value-added taxes are preferrable to tariffs both from an economic efficiency and from a revenue standpoint. These taxes are also easier to implement and administer. In this context, the moratorium is a valuable commitment device which can help to effectively channel developing countries’ tax reform efforts in a more efficient direction. This transition would require further investment by the global community in modernizing the tax and customs infrastructure of developing countries to adequately meet revenue needs in the digital era.