It is highly believed the proposed law to tax e-commerce or technological giants may have serious repercussions for countries like Botswana.
On the 30th of September, the African Tax Administration Forum (ATAF), of which Botswana is a member, released a roadmap of taxing tech giants titled ‘Suggested Approach to Drafting Digital Services Tax Legislation’.
The proposal comes at a time when ATAF is concerned that companies such as Alibaba, Amazon, Google, and Netflix among others derive revenue from Africa without paying a single thebe in taxes as they do not need offices wherever their clients are.
A tax expert at Aupracon Tax Specialists, Jonathan Hore, says such a move though important, it may have serious consequences for a continent like Africa.
“Considering that Africa is not technologically advanced as other parts of the world, the tech giants may simply switch-off each country which enacts such legislation to avoid being subjected to tax,” explained Hore.
Further, Hore is of the view that the tax could worsen bilateral relations between the countries in which the tech giants are headquartered and each African country which seeks to tax the online services.
He fears that the move could also trigger trade wars between Africa and the USA, China, and Europe where most of these companies are headquartered.
The Forum has proposed that a tax of between 1 percent and 3 percent of the annual revenue derived from member countries be subjected to a Digital Sales Tax.
This form of tax targets revenue streams such as online advertising, online gaming services, and services delivered through the online marketplace.
It is reported that countries such as Kenya and Nigeria have already enacted laws to collect the tax.
“There is a consensus that tech giants must be taxed on income which they generate from Botswana, in our case, even though they do not have offices here,” said Hore.
However, given the fact that their management, accounting records, and bank accounts are all outside Botswana, Hore said implementing the law may sound good but it may not yield the desired results.
He said the easier way of getting tax from these companies would be introducing withholding taxes on all the envisaged online services and requiring Botswana-based clients to deduct and pay the tax to Botswana Unified Revenue Services (BURS) before paying for the services.
“This is a more realistic option than legislating to tax persons who are outside the borders without access to their offices, books of accounts, bank accounts, and debtors,” he said.