Taxing the Digital Economy – More Countries Plan New Taxes

This Newsletter has reported on attempts by governments to tax various aspects of the digital economy. SA has been planning to tax companies such as Netflix, Amazon, and Facebook since 2020, when a report was published which, among other recommendations, included a proposal for a new tax on digital social media and entertainment companies. Zimbabwe and Nigeria are the latest African countries to layout plans for the collection of taxes from ecommerce and digital companies such as Netflix, Google, YouTube, and Amazon. Last month, the Nigerian finance minister unveiled plans to tax international digital and ecommerce companies that offer services to locals at a rate of about 6% of turnover. This comes after a much-criticised push by some African governments to tax digital payments and mobile money usage as governments tried to broaden revenue collection during COVID.

Zimbabwe has entered into a public-private partnership agreement to provide “revenue collection service through taxing qualifying companies” in digital services, including cryptocurrencies. Kenya’s revenue service has a notice on its website of a Digital Service Tax (DST) that “is payable on income derived or accrued in Kenya from services offered through a digital marketplace”. Cameroon has imposed taxes on digital services and ecommerce for products billed in Cameroon, but some content creators on YouTube and Facebook are monetizing their pages outside of Cameroon, making it difficult for the government effectively to collect levies on these digital services. In Ghana, a new electronic transaction tax has been approved and is likely to start in May. The government hopes it will raise $900m of new tax revenue. The E-levy Act introduces a 1.5% tax on electronic money transfers and transactions and has sparked widespread criticism.