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Is the African Free Trade Area’s first big debate going to be about taxes on online purchases?

The rapid growth of the digital economy in many African countries has led to concerns about whether their tax regimes are equipped to deal with this new phenomenon. The shift from traditional bricks and mortar commercial environment to one that is electronic and information-based poses serious and substantial challenges to traditional tax regimes. African revenue authorities face the daunting task of protecting their revenue base without hindering either the development and use of new technologies or the involvement of the business community in the emerging e-marketplace. Presently African countries apply different approaches. For example, SA partially follows the so-called de minibus rule favoured by Europe and North America, which argues that collecting customs duties on very small amounts costs the customs authority more than the value of the duty. The SA allows consumers to import two purchases of less than $20 per year bought online (this is considerably less than a person can bring in physically through a frontier customs post). The discussion is how African countries can participate in the multilateral discussions on the reform of international taxation guidelines, which are needed to deal with the challenges of the digital economy. In particular, African countries and the Developed World must recognised that African challenges are different from those of developed countries and therefore their solutions will have to be uniquely African.

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Alastair Tempest

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