{"id":42079,"date":"2021-11-30T14:46:13","date_gmt":"2021-11-30T14:46:13","guid":{"rendered":"https:\/\/www.africa-press.net\/tanzania\/?p=42079"},"modified":"2021-11-30T13:52:21","modified_gmt":"2021-11-30T13:52:21","slug":"why-is-taxing-online-business-vital","status":"publish","type":"post","link":"https:\/\/www.africa-press.net\/tanzania\/all-news\/why-is-taxing-online-business-vital","title":{"rendered":"Why is taxing online business vital?"},"content":{"rendered":"

Africa-Press – Tanzania. <\/strong><\/span>DIGITAL integration of national economies and markets has substantially rendered international taxation rules impotent.<\/p>\n

As a result, the current rules appear to create opportunities for tax avoidance and Base erosion and profit shifting (BEPS) activities in market jurisdiction.<\/p>\n

Thus, tax policymakers in Tanzania have to take bold moves by introducing digital service tax unilaterally.<\/p>\n

Digital Service Tax (DST) is a tax that may be imposed on income accrued from supplies of online digital service in a particular market jurisdiction.<\/p>\n

In another viewpoint, DST may be imposed on gross revenue made by digital service operators from supplies of online digital service in a market jurisdiction.<\/p>\n

Thus, DST will generally base on significant economic presence in a market jurisdiction. Sketchily speaking, the goal of introducing DST is to get residence digital service businesses and Non-residence Corporations to pay tax from the revenue or profit derived from consumers activities in the market jurisdiction.<\/p>\n

From a legal perspective, Digital Service Tax will be a measure to counteract tax avoidance and BEPS activities in a market jurisdiction.<\/p>\n

Arguably, DST will tax local users-created value as well as an excise tax on the digital economy to enhance progressivity.<\/p>\n

From a tax perspective, DST in Tanzania will be an advance tax taxable on profit based on the taxpayer\u2019s (supplier\u2019s) self-assessment.<\/p>\n

This means that the tax will not be an additional tax to affect the cost of doing business as speculated by DST pessimists.<\/p>\n

For instance, if the law establishes DST to be payable on a monthly basis, this would mean that residence and non-residence digital service operators in Tanzania who account for their corporate income tax (CIT) annually will deduct the DST payable in their annual tax return.<\/p>\n

However, a non-resident person without a Permanent establishment (PE) in Tanzania will have to appoint a representative to account for the DST in Tanzania.<\/p>\n

Pragmatically speaking, DST in Tanzania will be an income tax, meaning that the proposal will capture all income accruing from supplies of digital content including downloadable mobile apps, e-books and films; over the top services including streaming television shows, films, music, podcast, sale, licensing of or any other form monetizing data collected about Tanzanian users which have been generated from the user\u2019s activities in the market place; subscription based media including news, magazines and journals; electronic data management including web hosting, online data warehousing, file-sharing and cloud storage services; electronic booking or electronic ticketing services including the online sale of tickets; provision of search engines and automated held desk services including supply of customized search engine services; online distance training through pre-recorded media or e-learning including online courses and training; any service provided through market places meaning.<\/p>\n

Arguably, our DST proposal will be a tax on profit and will not be passed to consumers.<\/p>\n

Therefore, the DST road map in Tanzania will burden non-resident operators to appoint a tax representative who would be responsible for monthly remittance of DST to the Tanzania Revenue Authority (TRA).<\/p>\n

As a matter of fact, DST will be subjected to income accruing from supplies of digital content including downloadable mobile apps, e-books and films; over the top services including streaming television shows, films, music, podcast; sale, licensing of or any other form monetising data collected about Tanzanian users which have been generated from the user\u2019s activities in the market place; subscription based media including news, magazines and journals; electronic data management including web hosting, online data warehousing, file-sharing and cloud storage services; electronic booking or electronic ticketing services including the online sale of tickets; provision of search engines and automated held desk services including supply of customized search engine services; online distance training through pre-recorded media or e[1]learning including online courses and training; any service provided through market places.<\/p>\n

Furthermore, engagement of non-resident entity in the provision of digital service to users located in Tanzania will be subjected to DST where; the user receives the digital service from a terminal (computer, tablet or mobile phone) located in Tanzania; the payment for the service is made using a debit or credit facility provided by a Tanzanian financial institution or Tanzanian company; the digital service is acquired through an internet protocol address registered in Tanzanian or an international mobile phone country code assigned to Tanzania or; the user has a business, residential or billing address in Tanzania.<\/p>\n

In a practical sense, there is reasoning that the introduction of DST will suffocate micro, small and medium enterprises (MSMEs) relying on the relatively low costs of most digital services.<\/p>\n

However, Tanzania may set a threshold that only entities with a particular level of annual turnover will be captured in the base to simplify administration.<\/p>\n

Admittedly, the high threshold would create a legal certainty as it is easier and less costly for businesses and tax authorities to determine whether an entity is liable for DST compliance or not.<\/p>\n

In fact, the high threshold will also exclude MSMEs and start-ups which would bear a disproportionate compliance burden as it is in the case of the Indian withholding tax threshold of 1,500 US dollars a year that exempts smaller businesses from the application of the DST.<\/p>\n

Thus, it is very possible to introduce DST unilaterally without consideration of any international agreement. Conversely, for successful imposition and implementation of DST in Tanzania, the government should:-<\/p>\n

\u2022 Remove uncertainty to non-residence digital service operators by considering DST as a gross revenue tax accruing outside of any treaty.<\/p>\n

\u2022 Develop its own approach to DST taxation which will consider the still limited (though growing) digital market in Tanzania, the benefits that Tanzania MSMEs are getting from the use of digital platforms, the peculiar administrative challenges of Tanzania tax administrations and so on. This approach would need to focus on the concerns of developing economies.<\/p>\n

\u2022 Introduce compliance enhancing mechanisms such as \u2018tax shaming\u2019; this is so because studies have shown that \u2018firms or their top executives face significant reputational costs from tax shelter involvement.<\/p>\n

\u2022 Ensure that the DST measure is compatible with existing domestic laws, DTA obligations and international rules.<\/p>\n

\u2022 Set a threshold that only an entity with a particular level of annual turnover will be captured in the base to simplify administration. Admittedly, the high threshold would create a legal certainty as it is easier and less costly for businesses and tax authorities to determine whether an entity is liable for DST compliance or not.<\/p>\n

\u2022 Act in concert through regional bodies like ATAF so as to have a better chance of leveraging their combined market potential to compel compliance by digital service operators.<\/p>\n

\u2022 Simplify DST compliance to non-residence digital operators in our market jurisdiction through ATAF collective action. This should include the establishment of a single point of registration, return filing and payment for digital operators rather than them having to do this in each of Africa\u2019s 54 countries.<\/p>\n

The writer holds BA. Arts, LLB, LLM-Taxation and is a part time trainer at the Institute of Tax Administration.<\/p>\n

For More News And Analysis About Tanzania<\/a> Follow Africa-Press<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Africa-Press – Tanzania. DIGITAL integration of national economies and markets has substantially rendered international taxation rules impotent. As a result, the current rules appear to create opportunities for tax avoidance and Base erosion and profit shifting (BEPS) activities in market jurisdiction. Thus, tax policymakers in Tanzania have to take bold moves by introducing digital service […]<\/p>\n","protected":false},"author":84,"featured_media":42078,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2,5,8,16],"tags":[6990,6991,711],"class_list":["post-42079","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-all-news","category-economy","category-homepage-english","category-twitter","tag-africa-press-2","tag-africa-press-tanzania","tag-tanzania"],"yoast_head":"\nWhy is taxing online business vital? - Tanzania<\/title>\n<meta name=\"description\" content=\"DIGITAL integration of national economies and markets has substantially rendered international taxation rules impotent. ...\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.africa-press.net\/tanzania\/all-news\/why-is-taxing-online-business-vital\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Why is taxing online business vital?\" \/>\n<meta property=\"og:description\" content=\"DIGITAL integration of national economies and markets has substantially rendered international taxation rules impotent. ...\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.africa-press.net\/tanzania\/all-news\/why-is-taxing-online-business-vital\" \/>\n<meta property=\"og:site_name\" content=\"Tanzania\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/AfricaPressTunisiaa\" \/>\n<meta property=\"article:published_time\" content=\"2021-11-30T14:46:13+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/static.africa-press.net\/tanzania\/sites\/17\/2021\/11\/img-61a62c7f0f28d.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1200\" \/>\n\t<meta property=\"og:image:height\" content=\"900\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"cfeditoren\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"cfeditoren\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"6 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.africa-press.net\/tanzania\/all-news\/why-is-taxing-online-business-vital#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.africa-press.net\/tanzania\/all-news\/why-is-taxing-online-business-vital\"},\"author\":{\"name\":\"cfeditoren\",\"@id\":\"https:\/\/www.africa-press.net\/tanzania\/#\/schema\/person\/068c7ab4e9634ae78ec5d54ec46598bb\"},\"headline\":\"Why is taxing online business vital?\",\"datePublished\":\"2021-11-30T14:46:13+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.africa-press.net\/tanzania\/all-news\/why-is-taxing-online-business-vital\"},\"wordCount\":1169,\"commentCount\":0,\"image\":{\"@id\":\"https:\/\/www.africa-press.net\/tanzania\/all-news\/why-is-taxing-online-business-vital#primaryimage\"},\"thumbnailUrl\":\"https:\/\/static.africa-press.net\/tanzania\/sites\/17\/2021\/11\/img-61a62c7f0f28d.jpg\",\"keywords\":[\"Africa Press\",\"Africa Press-Tanzania\",\"tanzania\"],\"articleSection\":[\"all news\",\"Economy\",\"homepage-english\",\"twitter\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.africa-press.net\/tanzania\/all-news\/why-is-taxing-online-business-vital#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.africa-press.net\/tanzania\/all-news\/why-is-taxing-online-business-vital\",\"url\":\"https:\/\/www.africa-press.net\/tanzania\/all-news\/why-is-taxing-online-business-vital\",\"name\":\"Why is taxing online business vital? 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