Africa-Press – Uganda. African countries, through African Tax Administration Forum (ATAF) are seeking ways as a bloc through which they can tax the digital economy, which continues to present difficulties for tax authorities across the continent.
Big tech giants such as Google and Facebook, among others, rack up huge amounts of revenue from low income earning economies but do not contribute much to the growth of such economies.
Mr Ian Rumanyika, the Uganda Revenue Authority (URA) manager public relations and corporate affairs, at the weekend told Daily Monitor there is an ongoing conversation at regional and continental level on how to move in on the digital economy without suffocating businesses hosted on such platforms.
“[The discussion is seeking to tax] the digital economy [with] main focus on the huge multinationals that siphon income from Africans or Ugandans but give back nothing,” he said, noting much of Africa is struggling with archaic tax systems that are not pegged to residency of the business coupled with difficulty in tracing online transactions.
Mr Rumanyika recently said that for a tax to be imposed on a transaction, the tax authority has to know where it took place and also recognise the category in question, failure of which there might be a case of double taxation.
Existing digital tax
In 2019, government imposed a Shs200 levy on social media access, introducing a tax – over the top tax (OTT), which remains highly controversial.
Kenya also recently joined Uganda and Tanzania within East Africa in taxing online transactions. ATAF believes they can build capacity under a bloc to plan a better and more efficient way of taxing tech giants, some of which command huge budgets that are bigger than most African countries.
Understand the digital economy
At least 47.2 per cent of Ugandans, according to Global Stats use Facebook, 24.4 per cent use Pinterest, 19.8 per cent have accounts on Twitter while 6.7 per cent use Youtube.
Video streaming platform, Netflix which earns money from video content, is also budding in Uganda.
Whereas Uganda remains an insignificant market for major tech giants, Statisca puts video streaming penetration in Africa at 10.5 per cent in 2020 and is expected to hit 14.2 per cent by 2024 with revenue in the Video Streaming segment amounting to $1.1b in 2020.
The digital economy has grown at a supersonic speed with the emergence of Covid-19, which forced businesses to shift to digital operations, which came with a lot of innovations.
Challenging
However, ATAF notes that lack of political will from African elite, leadership and the overshadowing of African views by other countries of the Organisation for Economic Cooperation and Development, present some challenges.
“African countries are not actively engaged on the matters and these changes to taxing rights and profit allocation rules are not being discussed by our political principles at the highest level [African Union],” a publication by ATAF, reads in part.
Already, in Europe, France passed a tax that targets tech giants Google, Apple, Facebook and Amazon through which they will pay taxes for the revenue generated within France.
Mr Micheal Niyitegeka, the International Computer Driving Licence Africa country manager for Uganda, said while the initiative is welcome, there is need to attract tech giants to set up shop in Uganda through ensuring growth of subscriber numbers in the country.
“From a technical sense, there are a couple of things you need to be sharing for it to make sense such as infrastructure, say if governments had control of the infrastructure. There is also need to harmonise laws and regulations, access to content and traceability, which would justify a tax assessment,” he said at the weekend.
What the future holds…
The shrinking of international taxes due to various tax treaties and shifting donor funding priorities due to Covid-19, it has now become apparent that Uganda needs to rely on domestic revenue mobilisation to service her needs.
As a result, Uganda Revenue Authority has constituted a team to discuss ways of taxing e-commerce and online businesses without stifling their growth.
This comes after social media platforms are currently blocked in Uganda allegedly over what government calls a “security threat.”
Meanwhile, Kenya, in 2020 introduced two taxes that seek to tax the digital economy and transactions.
The digital service tax, which took effect in January 2021, imposes a 1.5 per cent levy of the gross transaction value on resident and non-resident entities that provide digital services or on persons collecting payment for the digital service provided.
In addition, Kenya introduced the value added tax on digital marketplace supply but is yet to be enforced.
Only time will tell what Uganda’s future holds for the digital economy. [email protected]
