Multinationals in digital tax get-away
Prosper Ndlovu, Business Editor
DESPITE their wider digital footprint across Africa, multinational corporations continue to operate with minimal or no taxable physical presence, which robs the continent of significant potential tax revenue, according to the African Tax Administrators Forum (ATAF).
This comes amid a realisation that the continent could be losing billions of United States dollars on the back of the fast-growing digital economy where acts of illicit trade, tax evasion and money laundering are feared to be rife.
“Many African countries are increasingly concerned about the impact of digitalisation on their ability to collect the taxes required to fund their development,” said ATAF, the sole continental body on tax matters.
“The so-called ‘Nexus rule’, which forms the basis of the current international framework for the allocation of taxing rights, indeed creates business models, which allow multinationals to carry out business in African countries with no or very limited taxable physical presence, resulting in significant losses in tax revenues for the continent.”
The Zimbabwe Revenue Authority (Zimra) has also joined the bandwagon of tax administrators around Africa in a drive towards a common position on taxing rights targeting the digital economy.
Zimra commissioner general, Ms Faith Mazani, recently stated that the tax body was pushing for legislation to cater for taxation of online transactions after realisation that digital trade has grown drastically with more citizens embracing the model. She said numerous online applications, some of them run by local telecommunication service providers, were being used to transact without taxation.
This includes scores of people in the diaspora who buy groceries online for their families and these were collected without paying tax.
However, Ms Mazani said Zimra has no technical capacity and rights to tax the digital economy hence the need for an enabling policy.
This state of affairs has triggered a global debate over the need to revisit the existing international tax rules as Africa demands taxation rights on the global digital economy, which is largely controlled by the developed countries.
ATAF, the African voice in this debate at continental and international levels for the past decade, would hold the 4th International Conference on Tax in Africa (CTA) in Kampala, Uganda from 19 to 22 November 2019, which will coincide with the organisation’s 10th anniversary celebrations. The high-level indaba will run under the theme: “Innovation – digitalisation and harnessing technology to improve tax systems” and is expected to draw a diversity of delegates from across the continent.
“Experts and tax officials from the continent and abroad will be unpacking the different proposals for the revision of international tax rules, highlighting their potential implications for Africa,” ATAF media and communications manager, Mr Romeo Ella said.
In pursuit of this mandate, ATAF has also roped in media houses in Africa for collaborating towards furtherance of the African tax agenda. Recently, ATAF has been rallying African countries to consider using political pressure through the African Union and the Pan-African Parliament to secure taxation rights to the global digital economy, which is largely controlled by multi-national companies headquartered outside the continent. To buttress this effort, regional member states have been called to aggressively invest in information technology and necessary digital platforms to improve tax administration in addressing issues like taxpayer filing, payment and gathering of intelligence for risk assessment.
Founded in November 2009, ATAF is an African inter-governmental organisation currently comprising 38 member countries, whose mission is to improve tax systems on the continent.