BIZweek n°313 23 oct 2020
BIZweek n°313 23 oct 2020
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  • Parution : n°313 de 23 oct 2020

  • Périodicité : hebdomadaire

  • Editeur : Capital Publications Ltd

  • Format : (260 x 370) mm

  • Nombre de pages : 7

  • Taille du fichier PDF : 2,8 Mo

  • Dans ce numéro : une taxe sur les services digitaux proposée aux pays membres Africain.

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VENDREDI 23 OCTOBRE 2020 BIZWEEK ÉDITION 313 LA TOUR AFRICAN TAX ADMINISTRATION FORUM Digital Services Tax proposed for member countries The African Tax Administration Forum (ATAF), on 30 September 2020, released its ‘Suggested Approach to Drafting Digital Services Tax Legislation’as guideline for taxing highly digitalized businesses operating in member countries (Mauritius is a member). The suggested legislation proposes standard text in terms of which tax at a rate of between 1% and 3% is to be levied on gross annual digital services revenue earned by a company or multinational enterprise in a country. Activities within the scope of the proposed legislation include online advertising services, data services, online marketplace or intermediation platformservices, facilitation of rental or use of real property located in a country, vehicle hire services, digital content services, online gaming services and cloud computing Many African Tax Administration Forum (ATAF) members (Ndlr : Mauritius is also a member) have reported difficulties in taxing highly digitalised businesses operating in their countries. Their economies are rapidly becoming more and more digitalised and that digitalisation often enables multinational enterprises (MNEs) to carry out businessin African countries with no or very limited physical presence in those countries. This trend has increased due to the use of digitalised process necessitated by the COVID-19 pandemic that has seen some MNEs with physical presence in a country close their premises and move to online trading. This makes it difficult for countries to establish taxing rights over the profits the MNE is making from those business activities. This is due to the current international tax rules which only allocate taxing rights to a country where a non-resident enterprise creates sufficient physical presence in that countryi.e. creating a «nexus» in that country. Business models that enable an MNE to carry out businessin an African country with no or very limited physical presence in that country, therefore, represent a significant tax risk. The examples cited by commentators of such business models include social media platforms, search engines and online marketplaces. Digital service… meaning ? The OECD Inclusive Framework has for some time been discussing and trying to find a global consensusbased solution to the tax challenges arising from the digitalisation of the economy. ATAF has been providing technical analysis and support to its members who are also Inclusive Framework members to ensure that if there is a global solution it is fit for purpose in Africa (see the series of ATAF Technical Notes). Delay enacting and implementation A digital service is a service which is delivered over the internet or an electronic network including through online platforms. (2) For the purpose of Subsection 1, digital services include : (a) Online advertising services ; (b) Data services ; (c) Services delivered through an online marketplace or intermediation platform, including an accommodation online marketplace, a vehicle hired online marketplace and any other transport online marketplace ; (d) Digital content services, including accessing and downloading of digital content ; (e) Online gaming services ; (f) Cloud Computing services ; (g) Services other than those services above, delivered through a social media platform ; (h) Services, other than those services above, delivered through an internet search engine ; (i) Any other digital services which meets the criteria set out in Section 3(1). However, there is a significant risk for African countries in simply waiting to see whether the OECD Inclusive Framework can achievean international solution. Doing so could significantly delay enacting and implementing legislation to ensure countries obtain the appropriate taxing rights on the profits of highly digitalised businesses. Such delays may cost African countries millions of dollars of tax with many such business seeing significant increases in their profits during the COVID 19 pandemic. Meanwhile that pandemic has decimated many African economies and the need to ensure that tax revenues bolster national budgets has become critical to sustain even the most essential national requirements in the pandemic. To assist members in their consideration of whether to introduce new rules for the taxation of highly digitalised businesses, ATAF has developed this ‘Suggested Approach to Drafting Digital Services Tax Legislation’that sets out a proposed drafting for such legislation. This paper, which has been prepared by the ATAF Cross Border Taxation Technical Committee and ATAF Secretariat, contains a suggested approach to the drafting of Digital Services Tax (DST) legislation. It is intended to provide African countries that are considering introducing a DST with a suggested structure and content for their legislation. It provides a framework that draws from the various DST legislation enacted in other jurisdictions but adapted to meet the specific challenges faced by African countries. Challenge to current tax framework DST is a way of collecting tax from those types of businesses that present the greatest challenge to the current international tax framework, and which have been paying little or no tax in Africa. In addition, the size of the digital economy is rapidly growing as a proportion of the total economy of African states. Consequently, it will become increasingly important for African countries to ensure that the digital economy is taxed appropriately. While the revenue raised may not be large for some African countries, a DST could have other benefits. Much of the recent public concern about the under taxation of multinationals has focused on high-profile digital companies that do not have a physical presence in countries so are not subject to income tax. By taxing these companies, a DST could improve public confidence in the fairness of the tax system, which is an important factor for the enhancement of voluntary compliance. Members should however note that the DST is a tax on gross turnover, and therefore would apply to firms in loss, or with low profit margins. This is something that can be partially mitigated with high de minimis thresholds, as the larger firms tend to be more profitable. Setting a lower DST rate could also help to mitigate this issue. However, these features cannot eliminate the issue altogether. It is important that DSTs does not reduce the growth of the digital sector in African countries, particularly start-ups and SMEs. For this reason, Members should consider whether there is a need for a robust de minimis threshold, to ensure the DST only targets established and profitable digital businesses. Section 1 sets out thateither a singular company or a MNE group is chargeable to digital services tax (DST) if it derives revenue from digital services during a chargeable period. The Section suggests that countries should consider a DST rate in the range of 1% to 3%. This is similar to the rates charged by many countries that have already enacted a DSTe.g. France and the United Kingdom. The proposed rate is low because the DST is charged on the gross digital services revenue of the MNE group not the net profit made on that revenue as would be the case with most Corporate Income Tax regimes. 4
VENDREDI 23 OCTOBRE 2020 BIZWEEK ÉDITION 313 TOBIAS ADRIAN (Financial Counsellor and Director of the IMF’s Monetary and Capital Markets Department) and KRISTALINA GEORGIEVA (Managing Director – International Monetary Fund) A Leap Forward on Cross-Border Payments The confluence of new technologies and renewed determination among policymakers are making significant improvements possible. Meanwhile, households and firms have come to expect (and demand) better services. The stakes are high. Changes to cross-border payments have a bearing on the stability of the international monetary system, on financial inclusion, and on the efficiency of trade and financial markets. And reforms may unlock innovation and much needed growth, particularly following the COVID-19 crisis. But a leap forward will only be possible if the world works together. And it has—in an exceptional manner. A roadmap to decisively enhance cross-border payments, led by the Financial Stability Board along with a wide set of institutions including the IMF, has just been endorsed by the G20. This is not one more report, but a set of concrete reforms, practical steps, and milestones that specific institutions will be held accountable to implement. Meanwhile, the IMF just published a staff paper on the macro-financial implications of new forms of digital money available across borders. Together, these papers provide a clear path forward, mindful of the challenges that lie ahead. If implemented, reforms have the potential to be transformative by making cross-border payments cheaper, faster, more transparent, and more widely accessible. The next step POST SCRIPTUM INTERNATIONAL COOPERATION When paying for coffee, we swipe, tap, wave, and soon may wink—a quick and painless exchange of coffee for money. But when paying for imports or sending remittances, we often fillout forms, wait for days, and pay—too much. Progress to improve cross-border payments has been slow, but is just about to take off. That is how history evolves—one small step at a time, until it suddenly leaps forward While international cooperation has gotten us this far, it will be all the more important to implement, and potentially even surpass, the G20 roadmap. Specifically, we need cooperation in four broad areas to ensure improvements to cross-border payments are effective, sustainable, safe, and equitable. First, solutions to cross-border payments must be designed and pursued with all countries in mind. Countries differ considerably in implementation capacity, existing infrastructure, and financial sector development. And with different countries come different users. These cover large companies operating in less liquid markets, cost-conscious small- and medium-sized enterprises, and the 1 billion people sending and receiving remittances (which at an average cost of 7 percent are still double the target set by United Nations’Development Goals). The G20 roadmap is appropriately flexible given this diversity of needs. Some solutions involve improvements to existing systems, such as devising trustworthy digital identities essential for financial inclusion. Others are more exploratory and consider a world in which we can freely trade digital currencies across borders, much like we sendemails today. It is essential that all these solutions continue to be pursued, discussed, tested, and some discarded—with an open mind. Second, cooperation is essential to overcome countries’«inaction bias,» and ensure solutions are widely applicable. A simple example is the operating hours of countries’settlement systems : only when two countries extend hours so they overlap can cross-border transactions be settled in real time. No country will want to act alone. Even then, the two systems must talk to each other. But interoperability is not a given. It requires basic technological, design, legal, and regulatory standards. Cooperation will ensure these satisfy the needs of a wide community, which the IMF can help congregate. Third, cooperation is critical to build solutions that benefit from the experience and perspective of all relevant actors—such as central banks, regulators, finance ministries, anti-trust agencies, data protection agencies, and international organizations. The Financial Stability Board report was exemplary in this respect. Moreover, the public and private sectors must cooperate, recognizing each other’s strengths : private companies to innovate and interact with users, and the public sector to regulate, supervise, and ultimately provide trust to the system. Where possible, public-private solutions should be explored. Lastly, cooperation means recognizing the macro-financial effects that one country’s policies can have on others. For instance, new forms of digital money issued in major reserve currencies could improve domestic as wellas cross-border payments. But they could also induce citizens abroad to forego their domestic currency, especially in countries with high inflation and volatile exchange rates. And digital money could potentially facilitate bank runs out of these countries. Meanwhile, source countries could see more volatile capital inflows and central bank balance sheets. Moreover, it is unclear if capital account restrictions, which many countries adopt, can be redesigned so they are not circumvented by digital money. Finally, the use of digital money could raise significant risks to financial integrity. These and other scenarios are detailed in our new paper. Global links Monetary policy, financial stability, capital flows, international reserves—all could be affected by transformations in cross-border payments, with implications for the international monetary system. The IMF’s founding members understood this link, which to some extent lies behind the vision to «assist in the establishment of a multilateral system of payments,» as stated in the Articles of Agreement. Today, the IMF continues to play an active role in this space, working hand-in-hand with other international organizations. Our near-universal membership can help ensure that the digital revolution benefits people in all countries. And our global perspective can help recognize spillover effects, as wellas provide a common forum to address the underlying policy dilemmas. Let’s engage on this promising path together. 5

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