Here’s how much money government has made from taxing digital services in South Africa

Countries globally are grappling with a new digital economy, where companies sell digital goods and services across territories, but may not be paying the appropriate taxes.

This was highlighted in a 2015 report by the Organisation for Economic Co-operation and Development (OECD), which formed an action plan to help countries take on the challenge.

The plan is primarily focused on using value-added tax (VAT) as a means of ensuring service providers and companies paid the appropriate taxes for goods and services over the internet, like streaming video or music, and other direct business-to-consumer (B2C) sales.

In an update on these measures, the OECD says that by June 2019, over 50 jurisdictions have adopted these guidelines, which has resulted in higher levels of compliance, higher tax revenues and also a more level playing field between domestic suppliers and foreign vendors.

South Africa is one of the early adopters of the policies, and even introduced a tax on digital goods a year prior to the 2015 guidelines.

South Africa’s digital tax was implemented in 2014, and according to the OECD’s data has already delivered R3 billion in revenue to government as at February 2019.

Norway, which has been taxing digital B2C products and services since 2011 has received R9.9 billion through the VAT charge, while the EU has taxed R170 billion in the first three years of implementing the guidelines.

The OECD said that the measures have proved so successful that many countries are now turning their attention to the VAT treatment of imports of low-value goods.

However, one problem still remains, and that’s the taxation of big tech giants, Bloomberg reports.

Finance ministers from Group of 20 nations agreed during meetings in Fukuoka that they need to find a common method to tax technology giants, but that won’t be easy, according to Dondo Mogajane, director general of South Africa’s national treasury.

“Remember how long ago this started? It’s not going to be easy,” he said in an interview with Bloomberg.

“The language being used is still muted, purely because the understanding, and the convergence of ideas and views — we’re not there as yet,” he said, in reference to the terms of coming to a final agreement on the framework for taxation.


Read: National Treasury director-general on digital tax plan

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Here’s how much money government has made from taxing digital services in South Africa