Recently financial experts, tax administrators, among others, gathered in Abuja under the auspices of the West African Tax Forum (WATAF) to deliberate on how Africa, nay Nigeria, can leverage taxes from digitalised economy to grow and expand the national economy, writes Felix Omoh-Asun.
The recent high-level dialogue in Abuja of the West Africa Tax Forum (WATAF), which coincided with its 10th years’ anniversary, gave some take-aways on taxation in a digitalised economy.
The event which was held between September 22 and 23, attracted participants from the Economic Communities of West Africa States (ECOWAS), most players in the taxation sector, including tax administrators, financial experts from the academia, ministries of finance, stakeholders, among others.
They all gathered to ventilate their thoughts on the novel idea – Digital Economy and how African countries can explore the untapped revenue resources in it.
Nigeria’s Secretary to the Government of the Federation (SGF), Boss Mustapha, declared open the 17th General Assembly, after the Executive Secretary of WATAF, Tunde Oladipo had given his opening remarks.
Oladipo noted that tax in West Africa has realised its potential as an engine for fuelling the economy of West African countries. He said from the initial five countries that started the forum, it was gladdening to note that it has grown to 15 countries. Chairperson of the forum, Yankuba Darboe, said in his remarks, that countries of the world are focusing on how to move along with the digital economy and West Africa should not be left behind.
There were goodwill messages from ECOWAS President, Jean Claude Brou and Country Director, World Bank Group, Nigeria, Shubhan Chaudhuri.
Nigeria’s Minister of Finance, Budget and National Planning, Dr. Zainab Ahmed and Executive Chairman of the Federal Inland Revenue Services (FIRS), Muhammad Mami presented addressees at the occasion.
The event was facilitated by WATAF, with support from Federal Inland Revenue Service (FIRS), Nigeria, OSIWA, Africa Tax Forum (ATAF), OXFAM, Ford Foundation, and other donors.
The digital economy, a new language of world commerce of today, no doubt, requires new thinking, new economic policy framework, especially taxation policies, to give Africa nations a robust economic advantage. The new technological innovations without argument have transformed the way businesses are carried out.
With the world tilting towards the e-economy, a novelty exposed by the COVID-19 pandemic, the high-level policy dialogue, interrogated issues surrounding taxation in the new economic order.
The six panels dwelled essentially on how West African nations, albeit Nigeria, can tap from e-commerce through taxation.
After deliberations on the various sub-themes of the high-level policy dialogue under the title: The Taxation of the Digital Economy: Exploring Untapped Revenue Sources in African, there were recommendations on how African nations can fathom in and leverage from the digital economy.
The various speakers agreed that working from home was no longer an option but a necessity because of the COVID 19 pandemic which brought about a major economic shift. This demands that Africa countries develop a “Fit-in Purpose Approach to digital taxation and revenue mobilisation in taxing e-businesses that are not officially registered.
The participants, having identified huge financial involvement in developing structures to leverage the digital economy, called on the government of the sub-region to channel resources to tackle the challenges of the e-economy.
They advocated for a global approach to finding a way to tax e-preneurs with the attendant challenge of non-registration of their businesses with the CAC in Nigeria.
In an attempt to mobilise for untapped resources in digital economies, the participants tasked African nations to upgrade infrastructure to meet with the current trend, and develop a purpose-driven strategy to embrace modern tax administration. They were advised also to be proactive rather than reactive; and always engage in impact assessment. This is by seeking Knowledge, a key to tax administration.
The event resolved that ability to develop laws to manage the e-economy, upgrade the old system, spend more on local revenue mobilisation than looking up to foreign donors, are all essential to a robust tax administration and economic growth in the African continent.
It was agreed that governments across the board need to invest heavily in the technological infrastructure, by engaging experts to develop soft wares to track e-prenuers in other for them to pay taxes to grow the nation’s economy.
The high-level dialogue agreed that ECOWAS countries were lacking in Infrastructure development to leverage from the new economic order, and therefore urged to develop technologies that will enhance tax collection both in individual countries and the region as a whole. This, according to the speakers, is the way to cope and leverage the opportunities embedded in the economy that is changing and adapting to technological growth.
Double taxation and/or being biased in taxation of e-businesses, which speakers agreed could be an over-kill, should be avoided in other not to harm small scale enterprises struggling to survive.
To get the best for nations, tax policy-makers should think out of the box and come up with a new tax administration module with the fact that income taxation is under threat by the digital economy, noting that there is a vast opportunity which Africa is yet to benefit from in terms of taxation.
Towards this end, nations were advised to implement an effective collection mechanism, leverage the power of digital platforms to enhance VAT collection. All that was needed is create an efficient basis for the right to tax inbound international online sales, while at the same time facilitate compliance and strengthen enforcement modern, data-driven, risk management and administration cooperation among other countries of the world to maximize the advantage inherent in the digital economy.
The panelists accepted that digitalisation of the global economies has created new challenges as many African countries have been unable to tax highly digitalized businesses based on the current international tax rules. According to them rapid digitalisation of African economies often enables multinational enterprises (MNEs) to carry out business in African countries with no or very limited physical presence. The panel noted with dismay the current nexus and profits allocation rules that are weighted too heavily in favour of the residence jurisdiction to the detriment of the source (African) jurisdiction.
The panel identified three key factors prevalent in certain highly digitalized businesses to include: 1) cross-jurisdictional scale without mass; 2) reliance on intangible assets including IP, and 3) data-user participation and their synergies with IP.
As a way forward, tax policy and administration were called upon to be a vital part of African governments’ policy and enhance Domestic Resource Mobilisation (DRM). It was also accepted that coming together of Africa Tax Association (ATAF) and other regional organisations such as the WATAF will support African countries in achieving the set objectives.
The need to begin to make Facebook, googles and other social media providers pay tax in all African countries was emphasised. To this extent, African countries should be proactive by adjusting their local legislation to be effective.
The way to go is to tax on the content and services, create a new tax, expand the scope of existing income tax, or agreed on treaties whether to call it any type of levy.
However, the reactions to unilateral measures from other countries on new international tax proposals will be a challenge but Africa should create new model articles to tax payments for automated digital services and rationalise the domestication of tax laws and rules.
Although, they said it will be impossible to have a global concession on the standard to achieve success on the collection of digital tax, African countries, nevertheless, have to begin with the minimum standard.
https://any.peopleandpowermag.com/digital-economy-minefield-waiting-to-be-tapped/
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