Business
Kenya and Nigeria are Leading Africa’s Push to Start Taxing Silicon Valley’s Global Tech Giants By naijapops Internet use across Africa skyrocketed from 2.1% in 2005 to 24% by 2018—the highest growth rate globally. That growth has seen global tech companies from Facebook and Google to Uber and Netflix expand their digital services across the continent, not just to capture the still small current market but also to strategically position themselves bearing in mind Africa's young population and expected population boom. But, like elsewhere, African governments are increasingly looking to develop a framework that allows them to generate tax revenue from these very popular digital services when used within their territories. The upside is obvious: collecting "digital taxes" will help African countries on their quest to grow their local tax bases which are typically undercut by large and un-captured informal sectors. Then there's the benefit of diversifying income sources—a boon especially for some large African economies dependent on the export of raw commodities. And while it'd be important at any time, it's especially important now given the looming economic challenges of Covid-19 with the Sub-Saharan Africa region set for its first recession in 25 years.
technology companies that countries can adopt. But that slow-moving process is not guaranteed to be successful, especially after the United States pulled out of talks last month. Full speed ahead Without a global, or even continental standard in place, African countries have typically levied digital operations indirectly through a range of taxes on mobile financial transactions and value-added taxes on communications services including calls and mobile data. As local internet use has grown among Africa's middle-class, tech multinationals—from ridehailing giants like Uber and Bolt, and social media platforms like WhatsApp and Facebook to e-commerce marketplaces like Amazon and Alibaba, and entertainment streaming platforms like Netflix and Spotify—have increasingly provided their services to African users. Even though Africa still accounts for a tiny slice of these companies' global revenues, their rising prominence and influence in local markets means African governments eye as them as taxable targets regardless of the fact several do not have a physical presence in their countries.
There's just one problem. Without provisions in existing legislation and international tax treaties, there's currently no global standard for setting up and implementing taxes on multinational technology companies. "The law is now just trying to catch up," says Wole Obayomi, head of tax, regulatory and people services at KPMG Nigeria. For its part however, Change the game the Organization for Economic Co-operation And so Nigeria and Kenya—two of Africa's and Development (OECD) is working on creating largest internet markets and most developed a new global tax framework for multinational tech ecosystems—have stepped up plans to tax
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July-August 2020
DAWN
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