Taxation of digital platforms and digital services has become an emerging issue due to the rapid growth of digital commerce and the ability of multinational corporations to exploit loopholes in traditional tax laws to minimise their tax obligations. This has resulted in significant revenue losses for African countries, intensifying inequality and hindering sustainable development efforts. By advocating for fair and equitable digital taxation policies, TJNA aims to ensure that African countries can mobilise the resources needed to fund essential public services and promote inclusive economic growth.
In an increasingly digitalised global economy, the taxation of digital transactions presents a complex and pressing challenge for ensuring fairness and equity in tax systems across Africa.
The current technological advancement, digital economy, and way businesses are transacted today could leave African countries deprived of significant resources. Digital firms created strategies to collect, store, monetise and generate revenues out of personal data via advertising, e-commerce, product creation and cloud platforms. 80-100% of total revenue for Twitter, Google, Facebook, and Snapchat is made on adverts. Globally, the e-commerce value alone was estimated at $29 trillion in 2017. (UNCTAD, digital taxation report 2019).
The main concern is that digital platforms depend on intangibles and the fact that it is not easy to clearly determine where value is produced, hence the capability to shift profits to low- jurisdictions. The nature of the digital economy is susceptible to tax abuse and aggressive tax planning with a negative impact on the country's tax base. The digitalisation of the economy increasingly leads to multinational enterprises (MNEs) being able to “reach” into a jurisdiction and carry out business without any physical presence in that jurisdiction and thus create no taxable presence in that country. (ATAF tech note, digital taxation). Case in point, Facebook, and Google, despite having billions of users in developing countries paid respectively 92% and 88% of their taxes in the United States of America, yet the US accounts for less than half of their revenue.
TJNA is committed to addressing this issue by advocating for policies that promote transparency, prevent profit shifting, and ensure that multinational corporations operating in the digital sphere contribute their fair share of taxes to the countries where they generate profits as below:
- Advocating for the adoption of international tax standards that address the unique challenges posed by digital transactions, including the allocation of taxing rights and the prevention of profit shifting.
- Supporting the development of domestic tax policies that capture revenue from digital activities while minimising the risk of double taxation and promoting investment and innovation in the digital economy.
- Promoting transparency and accountability in the digital economy by advocating for the disclosure of relevant financial information by multinational corporations operating in the digital sphere.
- Building capacity among policymakers, tax administrators, and civil society organizations to engage effectively in discussions and negotiations related to digital taxation at both the national and international levels.
- Fostering collaboration and knowledge sharing among African countries to develop common positions and strategies for addressing digital taxation challenges and opportunities.
Through advocacy efforts and engagement with stakeholders at all levels, TJNA seeks to advance policies that promote fairness, transparency, and accountability in digital taxation, contributing to the achievement of tax justice in Africa.
