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
"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.
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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