East Africa eyes tax windfalls from big tech and digital services
Big tech companies such as Google, Meta (which runs Facebook and Instagram) and Netflix, among others, are increasingly being targeted for taxation in Africa.
While Tanzania is the latest country to engage the tech giants on possible taxation of digital services, Kenya is hiking its taxation, with South Africa and Zimbabwe looking to follow similar route.
Kenya said this month that it will raise its digital tax from 1.5% to 3% of gross transaction values in a bid to boost domestic revenues.
The Tanzania Revenue Authority (TRA) recently held discussions with Meta and according to an official Twitter posting from the TRA, focused on Tanzania’s plans to introduce digital services tax.
Tanzanian parliamentarians such as Neema Lungangira support the move to tax digital service providers. She said the new taxation would be “handy” in terms of revenue generation for the country.
“The Digital Service Tax comes in handy. In order to be taxed Companies like Twitter we must have a Digital Services Tax System … after my advice last year, the Government announced it would start looking into it,” said Lungangira.
However, experts warn that such taxes, in addition to taxes on digital finance platforms that are becoming popular across Africa, may discourage localisation of content by creators of digital content and could deter big tech companies from setting up offices in Africa.
Digital services players say tax authorities representing the East African Community (EAC) member states have agreed to develop a joint strategy to tax the digital economy. This includes tax authorities from Kenya, Uganda, Tanzania, Rwanda, South Sudan and Burundi who all believe that “a digital tax could boost revenues required to fund delivery of public services” within their countries.
Other services that could be taxed under the new initiative across East Africa include Netflix, DStv, and e-commerce platforms among others.