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Direct Digital Services Taxes in Africa and the Canons of Taxation

Author

Listed:
  • Favourate Y. Mpofu

    (School of Accounting, University of Johannesburg, Auckland Park, P.O. Box 524, Johannesburg 2006, South Africa)

  • Tankiso Moloi

    (School of Accounting, University of Johannesburg, Auckland Park, P.O. Box 524, Johannesburg 2006, South Africa)

Abstract

The unprecedented expansion of the digital economy has increased the intricacy of mobilising tax revenues from both domestic and international transactions. Tax evasion and avoidance are perpetuated by the invisible nature of digital transactions. To minimise the untapped revenues, countries all over the world are mapping policy strategies on how to collect revenue from this sector. African countries are not an exception. They have constructed digital tax policies to levy both direct and indirect taxes on digital transactions. This paper focuses on direct digital service taxes (DSTs). Direct digital service taxes have been an issue of debate among governments, policy makers, academics, tax bodies, and development organisations. Disagreements coalesce around their structure, their adherence to the canons of taxation, opportunities, and challenges as well as consequences of implementing them. Through a literature review, this paper assesses the legislative structure and administration of digital service taxes in relation to the canons of taxation. The findings of the review were conflicting. While certain aspects, motives, and possible outcomes of the taxes upheld the principles of taxation, some of these were conflicting with the principles. This could possibly be linked to variations in the economic, political, and social contexts in African countries and between developed and developing countries. The study recommends that while digital service taxes are an irrefutable necessity to tap tax revenues from the digital economy, African countries should ensure that equity, neutrality, economy, and efficiency among other principles are considered and balanced with the fundamental roles of tax policy.

Suggested Citation

  • Favourate Y. Mpofu & Tankiso Moloi, 2022. "Direct Digital Services Taxes in Africa and the Canons of Taxation," Laws, MDPI, vol. 11(4), pages 1-20, July.
  • Handle: RePEc:gam:jlawss:v:11:y:2022:i:4:p:57-:d:864051
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    References listed on IDEAS

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    2. Ndajiwo, Mustapha, 2020. "The Taxation of the Digitalised Economy: An African Study," Working Papers 15812, Institute of Development Studies, International Centre for Tax and Development.
    3. Ndajiwo, Mustapha, 2020. "The Taxation of the Digitalised Economy: An African Study," Working Papers 15427, Institute of Development Studies, International Centre for Tax and Development.
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    5. Rukundo, Solomon, 2020. "Addressing the Challenges of Taxation of the Digital Economy: Lessons for African Countries," Working Papers 15317, Institute of Development Studies, International Centre for Tax and Development.
    6. Favourate Y. Sebele-Mpofu, 2020. "Governance quality and tax morale and compliance in Zimbabwe’s informal sector," Cogent Business & Management, Taylor & Francis Journals, vol. 7(1), pages 1794662-179, January.
    7. Munoz, Laura & Mascagni, Giulia & Prichard, Wilson & Santoro, Fabrizio, 2022. "Should Governments Tax Digital Financial Services? A Research Agenda to Understand Sector-Specific Taxes on DFS," Working Papers 17171, Institute of Development Studies, International Centre for Tax and Development.
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