Challenges in Taxing Digital Firms in Africa Addressed in next ATAF Webinar
ATAF remains committed to supporting African countries in comprehending the implications of global tax reforms.
Pretoria, South Africa- The challenges of taxing highly digitalized businesses and the associated revenue loss have long been a major concern for Africa, writes Winston Mwale.
Many African countries, including members of the African Tax Administration Forum (ATAF), have faced difficulties in effectively taxing digital enterprises as their economies undergo increased digitalization.
Current global tax rules are ill-equipped for the taxation of this digitalized global economy, and domestic rules in many countries are also inadequate for taxing such businesses.
In response to these concerns, ATAF published a policy brief in 2020 to assist its members in formulating tax policies related to digital firms. Following this, ATAF issued its "Suggested Approach to Drafting Digital Services Tax Legislation," outlining various options for drafting Digital Services Tax (DST) rules.
While some African countries have begun considering the enactment of DST legislation, others have chosen to await the outcome of the Inclusive Framework negotiations on Amount A of Pillar One.
Amount A focuses on the taxation of the largest and most profitable digital firms.
In July 2023, the Inclusive Framework delivered an Outcome Statement, announcing the creation of an Amount A Multilateral Convention (MLC), set to open in the second half of 2023.
A signing ceremony is planned by the end of the year, with the objective of having the MLC come into force by 2025.
Recently, the OECD Inclusive Framework released the text of the MLC along with its Explanatory Statement.
The statement acknowledges that some jurisdictions have different views on specific items, but they are constructively working to resolve these differences.
The release of the statement raised concerns among some members, as it suggests potential delays before the MLC comes into force, leading to continued revenue loss from non-taxation of the digital economy. Additionally, members are troubled by the complexity and length of the Amount A rules, as the published MLC and Explanatory statement text totals 850 pages, reflecting the intricacy of the proposed rules.
To help ATAF members better understand the implications of Amount A MLC and explore alternative options for taxing digital firms, ATAF is organizing a webinar on 17th October.
This event will present the main features of Amount A and discuss various options available to countries for taxing digital businesses.
Logan Wort, the Executive Secretary of ATAF, emphasized that current global tax rules do not effectively allow African countries to tax digitalized businesses. Wort stated, "It is vital that African countries can effectively tax highly digitalized businesses, which is currently impossible under the existing global tax rules. Amount A is not only complex, but more concerning is the uncertainty of its implementation timeline, which means a continued lack of opportunity to tax the growing digital economy."
ATAF remains committed to supporting African countries in comprehending the implications of global tax reforms.
This webinar is part of a series planned to assist countries in navigating the complexities of taxing digital businesses.