SSUUNA: Taxing in the time of digitised economies

Friday November 8 2019

Tax

There is a need for an African tax co-ordination platform dedicated to addressing emerging tax challenges and shaping African positions on tax reforms at the global level. FILE PHOTO | NMG 

ROBERT SSUUNA
By ROBERT SSUUNA
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"Our New Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and Taxes," said Benjamin Franklin, one of the founding fathers of the Unites States of America.

Whereas this remains the case to date, globalisation has necessitated reshaping global rules for trade, investment and taxation.

Amidst these reforms, comes an agent that is more certain than both death and taxation, this agent is technology. It will influence the global economy in the foreseeable future.

African countries therefore need to beware of the opportunities and complexities resulting from digitisation of the economy.

First, the ability to supply digital services without physical establishment in a particular jurisdiction. Second, the heavy dependency of digital businesses on intellectual property.

Finally, the miss-match between the current value assessed by governments and actual value generated from user participation in the digital activities on some platforms.

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Harnessing the benefits of digitalisation and technological advancements requires regulation of both actors and operations within the digital space.

Among such regulatory reforms include; adjusting taxation rules to ensure that adequate revenue is generated without stifling innovation.

African countries need to fully understand and appreciate how the digitalised economy operates in order to tax it better. Particularly there is a dire need to safe guard the sovereignty of African jurisdictions in designing regulations that protect their taxing rights.

Indeed, as the momentum for a global consensual solution grows, other countries including members of the OECD, have embarked on unilateral solutions to taxation of the digitalised economy.

For instance, the equalisation levy in India, the digital tax proposals by the European Union Commission, Digital tax on big tech companies by France, Web tax in Italy, income tax on providers of services on digital platforms by Slovakia, the internet tax proposal in Hungary, among others.

These actions not only cast doubt on the practicality of the suggested solution, but also increases fragmentation of international taxation system. Amidst such challenges, African countries are left at a crossroads.

Evidently, some African countries are already taking unilateral measures which include, review of domestic rules to expand the definition of Permanent Establishment in Ghana, taxation of Over The Top Services in Uganda, taxes on mobile money transactions in Kenya and the recently proposed 5 per cent tax on digital transactions in Nigeria.

As effort to expand the mandate and sphere of influence by the UN Committee of Experts on International Taxation Matters gains momentum, there is a need for an African tax co-ordination platform dedicated to addressing emerging tax challenges and shaping African positions on tax reforms at the global level.

The co-ordination platform should increase support and co-ordinate efforts to increase investment in; research and development, automation of revenue administrations and the entire government to allow ease of exchange of information to harmonise policies and messaging targeting taxation of the digitalised economy.

Robert Ssuuna is a policy lead-tax at Tax Justice Network Africa. E-mail:taxjusticeafrica.net

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