Exploring Minimal Indirect Digital Economy Taxation as a Post-COVID-19 Economic Recovery Strategy for African Revenue Mobilisation

Abstract

The COVID-19 pandemic and its aftermath continue to
devastate most areas of society and continue to reveal inherent
structural vulnerabilities in the economies, social, and health
systems in countries. In addition, the Russia-Ukraine conflict
of 2022 and the geopolitics of its resolution continue to create
shocks across the globe- evidenced by rising inflation,
increased sovereign debt level, recession, and reduced public
expenditure among others. While many sectors of the economy
were crippled by the back-to-back global economic shocks of
the Covid-19 pandemic and the Russia-Ukraine conflict
through reduced economic activities resulting in a global
recession and reduced tax revenues for public expenditure, the
digital economy has surprisingly boomed and continues to
grow in this period of uncertainty. This has been directly
attributed to the 'lure of the alternative', caused by the social
and economic lockdowns imposed by countries, which pushed
many persons and companies to explore the next available
option- online platforms to conduct business. Although the
rise in the use of digital platforms for business activities is
commendable, this development has some implications for
traditional business frameworks which in turn affects revenue
mobilisation for funding public infrastructure projects and
services. This is because, in Africa, the digital economy is not as well-regulated as the traditional economy. This creates an
avenue for tax evasion and avoidance, arising from the dynamic
and complex nature of digital transactions. This challenge
requires that urgent solutions be found for the effective
taxation of the digital economy. There will be a need to
review/reform economic and fiscal policies and laws to ensure a
faster recovery from the economic effects of the COVID-19
pandemic. There would also be a need to create digital tax
policies that are equitable for source and market jurisdictions
and, lastly, there will be a need for cooperation in tax law and
policies across Africa that capture the reality of the growth and
ubiquitous presence of digital multinationals in Africa.