Africa in Talks on Taxing Big Technology Companies

03 September 2020

Tax officials in Africa estimate governments will collect between 10 and 30 percent less in taxes in 2020 because of the economic downturn.

The coronavirus crisis has caused businesses in the hospitality, building and retail industries to suffer. Yet digital companies have made plenty of money as more people stay home and carry out activities online.

The situation is driving talks on the continent about how to make sure international companies like Google and Facebook can be taxed. Such companies do not always have a physical presence in countries where they earn profits.

Logan Wort is executive secretary of the African Tax Administration Forum, or ATAF. His organization has met online to discuss these issues with government officials, the African Union and members of the Organization for Economic Co-operation and Development, or OECD.

A worker sorts online orders before they are delivered to customers from a Checkers store, amid a nationwide coronavirus lockdown, in Johannesburg, South Africa, July 14, 2020. Picture taken July 14, 2020.
A worker sorts online orders before they are delivered to customers from a Checkers store, amid a nationwide coronavirus lockdown, in Johannesburg, South Africa, July 14, 2020. Picture taken July 14, 2020.

Wort said the coronavirus crisis has led to massive earnings for digital services such as e-commerce and online transactions. Profits in e-commerce are expected to increase by 41 percent, the ATAF says.

Wort said, "Question: Are we collecting better on these transactions? Are we aware of these transactions? Are the businesses doing these transactions – do they have a physical presence in our countries? And, if not, do our regulations provide for them to be taxed?"

Talks about how to design tax rights laws for transactions across borders are now happening within the OECD. Governments worldwide are concerned there is a conflict between places where profits are reported and places where economic activities happen.

Victor Harison leads the economic affairs division in the African Union.

Harison has asked more African countries to join in the taxation talks so profits from international companies can be shared more equitably.

So far, he said, just 25 African countries are involved, "which is a cause [for] concern for the African Union."

David Masondo is deputy minister of finance in South Africa. He said Africa needs a central group within the African Union to speak with one voice on tax policies.

These unified policies should involve or bring attention to improving the share of tax rights in cross-border transactions. That includes the digital transactions of international companies, Masondo said.

The United States has pressed for its companies to be able to opt in and out of worldwide laws on taxing such companies – as long as they follow some general rules.

Annet Oguttu is a member of the high-level group on financial accountability and transparency. She noted that while Europe is in dispute with the U.S. over the issue, African countries should be included in the discussion, too.

She told VOA that much of the discussion seems to be about the U.S. protecting its international companies "and the European countries trying to get the best out of it."

Oguttu said, "Where do we stand as developing countries in Africa?" Coming together under the ATAF might present a more united front to be able to deal with these issues, she added.

International talks are expected to restart in October now that proposals on taxing technology companies have been shared among governments.

I'm Alice Bryant.

Simon Marks wrote this story for VOA News. Alice Bryant adapted it for Learning English. Ashley Thompson was the editor.


Words in This Story

hospitality – n. the activity of providing food, drinks, etc. for people who are the guests or customers of an organization

retail – n. the business of selling things directly to customers for their own use

forum – n. a place or opportunity for discussing a subject

e-commerce – n. activities that relate to the buying and selling of goods and services over the internet

transaction – n. an occurrence in which goods, services or money are passed from one person or account to another

affairs – n. commercial, professional, public, or personal business

opt – v. to choose one thing instead of another

accountability – n. required to explain actions or decisions to someone

transparency – n. the quality that makes something obvious or easy to understand