Tanzania’s Minister of Finance presented the Budget Speech for 2022/23 to the parliament on 14 June 2022. Among the thing raised were income tax measures which is the introduction of a Digital Service Tax at the rate of 2% on the turnover of non-resident digital service providers like US giant Meta, the parent company of Facebook, Instagram, and WhatsApp.
Tanzania set to impose a digital tax on Non-resident Digital Companies
This VAT measure involves "The amendment of the Value Added Tax Act to make room for the taxation of the Digital Services, with the Tanzania Revenue Authority to establish a simplified registration process to accommodate digital economy operators that have no presence in Tanzania (i.e., non-residents);
To validate this amendment, On 21st April 2022, the Tanzania Revenue Authority (TRA) held prior discussions with agents of META, the company that owns the apps Facebook, Instagram, and Whatsapp on how to tax their services in the country. Held at TRA headquarters in Dar es Salaam, the initiative is part of the government’s objective to introduce digital services tax on large technology companies.
TRA clarified that the discussion is targeted at how META should pay taxes based on the income they earn in Tanzania and guaranteed that Tanzanians will not be impacted by the introduction of these taxes.
Digital Service Tax in Sub-Saharan Africa Several sub-Saharan African countries has extended the scope of their indirect taxes to cover digital services.
However, only a few have implemented some form of direct digital services tax (DST) applying to non-residents with no local physical presence. Nigeria levies corporate income tax at the standard rate of 30% of taxable income from digital services, to the extent that a company has a significant economic presence in Nigeria and profit can be attributable to such activity.
Kenya introduced a digital service tax at 1.5% in January 2021 on the gross values of digital transactions, targeting resident and non-resident digital service providers, and said this month that it would raise it to 3% to boost domestic revenues.
At the beginning of October, 136 countries agreed on a framework tax agreement of minimally 15% under the auspices of the Organisation for Economic Cooperation and Development (OECD).
The agreement provides for taxation in each country of operation of a minimum portion of the income earned by US digital giants and a minimum global tax rate to avoid tax optimization. Since then, more countries, including Turkey and India, have signed up for the deal, which is expected to come into effect in 2023.
This is why Tanzania's finance and planning minister, Mwigulu Nchemba, made the digital tax proposal on Tuesday during the annual budget presentation to parliament. The proposal is however awaiting parliamentary approval before implementation. As stated, this move targets global internet giants offering services in the East African nation. The 2% tax will come into effect in July
Mwigulu Nchemba made a press statement that reads: "The Tanzania Revenue Authority will establish a simplified registration process for digital economy operators who do not have a presence in Tanzania.
This is to keep pace with the rapid growth of the digital economy," “This measure is intended to keep pace with rapid growth in the digital economy”.
Many countries have introduced such taxes, believing that digital giants making profits in their countries should also pay taxes there