ATAF has just published its suggested approach to drafting digital services tax legislation. The document is available on its website.
At the recent ATAF – African Union Commission High Level Policy Dialogue (held at the end of August), we were told to expect the document. It was released earlier today.
The document provides drafting guidance for African countries seeking to introduce digital services taxes. Quite a few countries have done so already, or are in the process of introducing them, for example, Nigeria, Kenya, and Tunisia. Others will obviously wish to follow suit.
Drafting the legislation is the ‘easy’ bit. Beyond that, there are many challenging parts, not least implementation. It is tempting for governments to focus on the ‘much-needed revenue’ they imagine they are losing due to the digitalised economy. However, when it comes to domestic resource mobilization, there are far more pertinent issues for African economies, such as the formalization of the informal economy. I would argue that African governments would be better served focusing on those for now. That would be a far better use of scarce tax administration resources.
Also, given the efforts currently underway to find a global consensus solution for taxing digitalised businesses, it might be worth waiting it out, to see what the OECD Inclusive Framework comes up with. There’s almost no point going to the trouble of designing and implementing a complex digital services tax, only to have to repeal it once a global solution is implemented.