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Africa’s digital economy: Nigeria leads in legislation compliance

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Ibrahim Apekhade Yusuf

WITH conventional revenue streams shrinking, African continent like their counterparts is now shifting focus towards harnessing digital economy as a veritable avenue to grow its revenue base.

Giving this insight recently was Mr. Muhammad Mamman Nami, Executive Chairman, Federal Inland Revenue Service (FIRS).

“We have seen countries that have introduced new measures to capture the revenue from e-commerce transactions as well as the greater digital economy. Nigeria has introduced a significant economic presence focusing also on automated digital services, while Kenya has also introduced a digital service tax,” he began.

Nami spoke in his capacity as the Chairman of African Tax Forum (ATAF), at the 4th ATAF High-Level Tax Policy Dialogue recently, during a Zoom conference under the theme, ‘Taxing Right for Africa in the New World and Effects of Covid-19: The Role of Tax Policymakers and Tax Administrators.’

“African citizens continue to look up to their governments where economies are stumbling to recover. From a taxation point-of-view, the notion of taxing rights occasioned by the current discussion on the taxation of the digitalised economy continues to be the centre point; pointing towards numerous opportunities,” he said.

As the world enters more complexity in the taxation of highly digitalised businesses, it will be up to policy direction to ensure that African countries do not lose out, he stressed. “To date, throughout the continent, there is a gap between tax policy and tax administration. Through ATAF country programmes, we note that some of our countries may be entering into a global consensus without fully operating its tax policy objectives. That is to say that a country may be in a position that isn’t ready for the changes, rendering their future in tax revenue precarious.”

African e-commerce is also rapidly growing, at an estimated annual rate of 40%. Indeed, the digital economy in Africa is expected to grow to over $300 billion by 2025 (McKinsey, 2013), on the back of massive mobile penetration, among other technologies.

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Digitalisation, Nami maintained, “Raises the question of how taxing rights on income generated from cross border transactions should be allocated between jurisdictions. The allocation of taxing rights between residence and source jurisdictions has been an issue of considerable concern for African countries for many years. Additionally, as seen in some states, an increase in e-commerce activity was realised during the lockdown restrictions. Revenue in the eCommerce market is projected to reach $20 million in 2020, which is a 41% increase from 2019.”

In a related development, Sim Shagaya, Entrepreneur, Founder of Konga.com, Annona and Emotion (Nigeria), noted that it is no longer appropriate to speak about the emergence of the digital economy in the future tense or exclusive to certain regions of the world. In Africa, it is happening here and now.

According to him, “The hyper connectedness brought on by the internet, ascendancy of data as a prime resource, emergence of artificial intelligence and the continued bridging of the digital and physical worlds (through robotics and gene editing) have already arrived the shores of the continent.”

The argument that Africa will lose out in the century through massive population growth and widespread joblessness lies on the observation that human capital on the continent is of such low quality and the momentum of change already very powerful. This is true but misses a few nuances, he stressed.

The 4th ATAF High-Level Tax Policy Dialogue attracted over 529 officials from Ministries of Finance and African Tax Administrations of 48 African Union (AU) member states, Members of Parliament, Regional Economic Communities (RECs), Civil Society, African Development Bank (AfDB), African Central Banks, African Stock Exchanges, Organization for Economic Cooperation and Development (OECD), United Nations Economic Commission for Africa (UNECA), International Monetary Fund (IMF), Development Partners including DfID and SECO, other key partners, individual tax policy experts and private sector players.

The event was jointly organised by ATAF and the African Union Commission (AUC), and with the support of the African Development Bank (AfDB).

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