KIGALI, Rwanda: The African Tax Administration Forum (ATAF) is working on a strategy to help African countries tax the digital economy. The digital economy has altered the global business landscape making it possible to operate a thriving business across borders, virtually tax-free.
This has created new challenges for the tax policy makers and administrators as most of their tax rules still rely on the brick and mortar concept of a permanent establishment to assign tax jurisdiction.
Over the past years tensions have been mounting over alleged tax avoidance by the multinational giants like Whatsapp, Facebook, Google, Amazon, Twitter and others, who operated digitally and seemingly out of reach of tax authorities. Botswana, in particular, has strong penetration of digital corporates, supported by one of the world’s highest mobile density rates where single users own and maintain multiple mobile phone subscriptions.
Speaking during the second media engagement session held here with African journalists, ATAF Mobilisation Resource manager, Thulani Shongwe said countries on the continent needed help to develop tax policies to catch up with the progression of the digital economy.
“For decades the digital economy has been avoiding paying tax and has rather been shifting its profits to low tax jurisdictions, depriving African governments the much-needed tax revenues,” he said. According to Shongwe, African countries are generally ready to tax the digital economy, as some of them have demonstrated the capabilities required to do so.
He said that Africa is already making strides in this regard through ICT revenue collection, re-registration of companies and encouraging the disclosure of beneficiaries in the companies. Botswana has launched a re-registration of all companies onto a national online platform, as well as beneficial owner legislation.
“The digital economy is booming and African countries are losing lots of money through tax avoidance. ATAF is also working on standard setting with the Organisation for Economic Co-operation and Development together with United Nations, in order to get a voice for African countries,” he said.