IDEAS home Printed from https://ideas.repec.org/p/idq/ictduk/15317.html
   My bibliography  Save this paper

Addressing the Challenges of Taxation of the Digital Economy: Lessons for African Countries

Author

Listed:
  • Rukundo, Solomon

Abstract

The rapid growth of the digital economy in many African countries poses serious challenges to traditional tax regimes. Revenue authorities must protect their revenue base without hindering the development and use of new technologies or the business community’s involvement in the e-marketplace. Two international taxation rules pose a challenge to taxing the global digital economy. The permanent establishment (PE) rule allocates taxing rights to a country where a digital multinational enterprise (MNE) creates a sufficient physical presence, and the profit allocation rule, based on the arm’s length principle (ALP), allocates profits based on value created. Both envisage a bricks-and-mortar business environment aligning taxing rights with the location of economic activities. Digital MNEs, however, can operate with only a web presence and use multisided business models to gain value from externalities generated by free products, challenging notions of where and how value is created.

Suggested Citation

  • 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.
    • Handle: RePEc:idq:ictduk:15317
    as

    Download full text from publisher

    File URL: https://opendocs.ids.ac.uk/opendocs/handle/20.500.12413/15317
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Favourate y Mpofu, 2022. "Sustainable mobilisation of tax revenues to enhance economic growth in Sub-Saharan Africa: Challenges, opportunities, and possible areas of reform," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 11(9), pages 222-233, December.
    2. Favourate Y. Mpofu, 2022. "Taxation of the Digital Economy and Direct Digital Service Taxes: Opportunities, Challenges, and Implications for African Countries," Economies, MDPI, vol. 10(9), pages 1-28, September.
    3. 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.
    4. Teckshawer Tom, 2023. "Challenges and Solutions to Global Digital Firms' Exploitation of Small Economies," Technium Social Sciences Journal, Technium Science, vol. 43(1), pages 288-301, May.
    5. Favourate Y. Mpofu, 2022. "Taxing the Digital Economy through Consumption Taxes (VAT) in African Countries: Possibilities, Constraints and Implications," IJFS, MDPI, vol. 10(3), pages 1-21, August.

    More about this item

    Keywords

    Economic Development;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:idq:ictduk:15317. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CATS administrator (email available below). General contact details of provider: https://www.ids.ac.uk/project/international-centre-for-tax-and-development .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.