The Presidential Commission on 4IR Report is Published – Taxation Proposals already contained in new DCDT White Paper

The PC4IR, which was set up in May 2019, has eventually published its report, which calls for more concentration on relevant skills and education; the securing of data for innovation including greater cyber-security; incentivizing new industry; reviewing, amending or preparing new regulation. The Report also proposes an “Industry 4.0 Strategy Implementation and Coordination Council” to fall directly under the Presidency, and that a Platform for advanced manufacturing and new materials is set up. The media has picked up on the proposals for taxation – these concentrate on the taxation of on-demand audio-visual services, such as Netflix, and corporation taxes on the ‘Big Tech’ companies (Google, Facebook, Instagram, etc).

This Newsletter reported on the Parliamentary Budget Office (PBO) proposals of July which had already recommended taxation of Big Tech. SA is following the Organisation for Economic Co-operation and Development (OECD)’s BEPs guidelines on this issue. The OECD has suggested that over US$200bn is lost by tax avoidance, mainly in developing counties. Some of the Big Tech companies are renowned for their ability to pay very little tax despite enjoying high turnovers, as the ICRICT (Independent Commission for the Reform of International Taxation) has pointed out in a new call for an acceleration of reforms in the taxation of multinationals. Meanwhile the OECD announced that agreement on the establishment of a global digital tax will be postponed until mid-2021. The original deadline for the end of negotiations between the OECD’s 137 member states was the end of 2020. However, due to major differences, particularly on which companies should be included in the new regime and whether the rules would be mandatory, as well as the effect of the COVID-19 pandemic, negotiations will need more time. At present it is impossible to forecast whether the SA’s tax proposals will be in line with the OECD or not.

As far as the new rules for on-demand entertainment services are concerned, the Department of Communications and Digital Technologies (DCDT) issued a White Paper, “A New Vision for South Africa 2020”, on 9 October, which proposes regulatory reforms in several areas, including imposing 2 types of licences (individual and class) requirements on Internet streaming services such as Netflix, Amazon Prime Video, and Apple TV+.  On-demand services which have an annual turnover of between R50 million and R99 million in the previous financial year will require a class licence. Services which turned over R100 million or more in the previous financial year must apply for an individual operating licence.

Video sharing platforms like YouTube will be exempt from these new licences but will have to apply new regulations on advertising, and, in particular, must abide by regulations related to hate speech, incitements to violence, public provocations to commit a terrorist offence, and the protection of minors. These regulations will be set down in a statutory code.

EFSA will be studying the DCDT White Paper to see how this relates to ecommerce. EFSA has also learnt that the DCDT is preparing a second White Paper on Digital Communications. Readers will recall that EFSA prepared a submission on the recent Competition Commission’s discussion paper on Competition in the Digital Economy. That submission is available from the EFSA Secretariat ([email protected]).