Digital Taxation: Can it Contribute to More Just Resource Mobilisation in Post-pandemic Reconstruction?

The acceleration of global digital services and e-commerce has exposed the outdated nature of many tax regimes around the world. The forgone potential revenues for states, particularly in the context of post-pandemic economic reconstruction has further necessitated the updating of the tax system to address what is an increasingly global and complex challenge. For Africa, the situation is arguably even more precarious with the dawn of the African Continental Free Trade Area, ACFTA, where there is an expected significant drop in conventional physical trade tariffs. As trade barriers begin to ease across the region and e-commerce gradually becomes more pervasive the success of the proposed single digital market will depend on some levels of harmonisation digital taxation policy. The paper highlights how digitalisation and datafication has posed challenges for traditional tax revenue systems. However, the accelerated growth in digital services and e-commerce also presents new opportunities for Africa’s economy. The paper seeks to inform effective governance of global public goods from a developing country and regional lens, exploring the challenges and opportunities created by the digitalisation and datafication of Africa’s economy and the policy options for justly expanding the tax base for optimal state formation. Findings from the paper indicate that the stringent digital tax policies as currently applied on end-users within the continent – rather than the global platforms – as a means of appropriating location-specific rents within the digital economy, have the potential to lower affordability of online services as well as impede the fundamental human right of freedom of speech. While the paper is of the position that the emerging unilateral approaches to digital taxation in Africa can serve as a temporary gateway and a starting point to better grasp the value creation and capture dynamic of the digital economy, it has a significant disadvantage of risking a global impasse for global bilateral trade obligations.