Twenty-one African countries have enacted rules for non-resident suppliers to account for value-added tax, goods, and sales tax on electronically supplied services, a new report by PwC has revealed.
According to the report, taxation of Africa’s digital economy is on the rise, with several countries on the continent having introduced or amended their VAT/goods and sales tax and other indirect tax laws and regulations to tax the digital economy.
It was revealed that this had been done by expanding the scope of taxation to cover electronic services supplied by non-resident providers to local consumers.
The PwC’s report, titled ‘2024 VAT Guide in Africa: Digital Services’ is a special edition of its VAT in Africa Guide, focused on new rules and measures that had been introduced to tax the digital economy by countries across Africa, especially for electronically supplied services across borders.
Of the 54 countries in Africa, the report said that 21 had enacted rules for non-resident suppliers to account for VAT/GST on ESS with five more countries (Botswana, Ethiopia, Mali, Republic of Congo and Rwanda) in the pipeline.
Commenting on the report, PwC Africa Indirect Tax Leader, Job Kabochi, said, “Unfortunately, there is no uniform or harmonised approach to taxing the digital economy in Africa. Different tax policies in different countries reflect significant variations and complexities in their definitions of services liable to tax, value thresholds, and tax rates and requirements associated with registration, compliance and enforcement.”
He adds that non-resident suppliers of ESS often find that, increasingly, most countries in Africa are taxing both business-to-business and business-to-consumer supplies.
“Additionally, the legal framework in many countries remains fluid about the definition and scope of services that qualify for taxation as digital supplies.
“In short, rules and measures may not align with internationally accepted best practices and therefore create uncertainty, confusion and controversy for both tax authorities and taxpayers,” Kabochi noted.
According to PwC West Market Indirect Tax Leader, Abeku Gyan-Quansah, smartphone adoption, in particular, has enabled access to the internet, even in remote areas, and has facilitated mobile banking and e-commerce, among many other services.
“Digital transformation efforts have also fostered the emergence of local tech hubs and startups that are developing solutions for unique challenges and opportunities across Africa, Digital education platforms are also addressing some of the gaps in Africa’s educational systems and providing scalable opportunities for learning and development.
“These efforts are a clear indication that Africa’s digital transformation is continuing to significantly contribute to the continent’s economic growth, innovation and improved quality of life,” he expounded.
The World Bank estimates that Africa’s digital economy could contribute up to $180bn to GDP by 2025 and create millions of jobs and opportunities for entrepreneurs, particularly for youth and women.
