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The Presidential Commission on the Fourth Industrial Revolution established by President Cyril Ramaphosa has published a report recommending a number of changes to South Africa’s digital policy.
Among these proposed changes is the implementation of a digital tax on global companies such as Netflix, Amazon and Facebook, which operate in various countries around the world.
The commission argued that these companies should pay taxes on their operations in South Africa and should not be allowed to evade tax obligations.
“It is a priority for this Commission to recommend that RSA actively participate in international efforts to ensure that technology companies pay a fair share of taxes in the countries in which they operate,” the report states.
He added that the infrastructure investment needed to promote digital services in South Africa can only be financed sustainably if international tech companies “cannot avoid and evade taxes in the way they currently do.”
These tax avoidance techniques include the sale of intellectual property to tax havens, where profits are allowed to accumulate and little or no taxes are accrued in the countries where these companies operate.
If this recommendation is implemented, companies like Netflix and Facebook, both have been accused of funneling money through tax havens to avoid tax obligations – they will have to pay taxes on their operations in South Africa.
The result of this may be an increase in the prices of Netflix subscriptions in South Africa, unless the global streaming giant chooses to shoulder the tax burden without passing the additional cost on to its customers.
Reasons for a digital tax
The commission’s report mentioned that South Africa’s digital strategy needs to be informed by its international counterparts, and local regulators can look to countries like France for guidance on their digital tax.
France is considering imposing a 3% tax on digital giants like Netflix and Amazon, stating that this move “has never been more necessary.”
Many other European countries are looking to do the same, and South Africa may consider this example as additional motivation for the implementation of a digital tax.
Another reason South Africa may consider imposing a tax on the main international companies operating locally is to account for a deficit in their budget, which has been decimated by the COVID-19 pandemic.
However, the willingness of many countries to impose a tax on companies like Netflix is inhibited by the lack of a unified approach.
Many nations are waiting for the Organization for Economic Cooperation and Development (OECD) to design a unified digital tax approach to be adopted globally to prevent more countries from unilaterally imposing a digital tax.
When you last asked about the tax you paid in South Africa, the streaming service pointed out that it was already paying VAT in the country.
Now Read: SABC Will Take On Netflix And Spotify With Their Own Streaming Services
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