The African Tax Administration Forum (ATAF) has suggested an approach to drafting legislation on digital sales tax services.
The Suggested Approach – published on September 30 – has been developed by the ATAF Secretariat and ATAF’s Cross-border Taxation Technical Committee. It is aimed at helping African countries that are considering implementing digital service tax to tax transactions of highly digitalized businesses.
According to a news report by transferpricing.com, an online medium, the Suggested Approach is intended to provide African countries with a suggested structure and content for their legislation and possibly the regulations.
The approach also provides a framework that draws from the various digital services tax legislation enacted in other jurisdictions but adapted to meet the specific challenges faced by African countries.
The Suggested Approach proposes that countries set de minimis thresholds which will ensure that they only target large and profitable digital businesses. This approach, coupled with setting modest rates of digital services tax will be important for promotion of investment and growth in the digital economy in Africa, the ATAF noted.
It would be recalled that recently as the rise of global digital economies introduced uncertainties and exposed many loopholes in most existing tax systems, particularly the difficulties in collecting tax from those conducting digital activities without a physical presence in a jurisdiction, many countries, including Nigeria, Thailand, etc, are enacting new legislations and policy measures to track payable taxes on digital transactions to optimizing their tax revenue generation potential.