Rwanda is the latest African country to announce plans to tax online services consumed within the country.
This comes a few months after Zimbabwe and Nigeria laid out plans for the collection of taxes from e-commerce and digital companies such as Netflix, Google, YouTube, and Amazon.
According to the Rwanda Revenue Authority (RRA), a proposal has been presented before the Ministry of Finance and Economic Planning from where it will undergo several procedures before implementation if approved.
“When you pay for services such as Netflix, you are using money that you have generated in Rwanda. So, we are asking, why don’t we collect VAT on these services yet they are being paid for by our citizens? If you pay 12 dollars a month for Netflix, why don’t we keep some of that amount at the source here?” Jean-Louis Kaliningondo, the Deputy Commissioner General of RRA said.
A number of African countries have expanded the scope of their indirect taxes to cover digital services, but only a few have so far implemented some form of direct digital services tax.
He noted that one of the big principles about VAT is that it is paid to the country where the service is being consumed.
“If you go to Western countries, for example, France, you find that Amazon pays VAT yet it is not a French company. European countries are collecting VAT on services provided by foreign platforms, he added.
African governments still face a lot of criticisms on their intentions to tax digital/online services. A recent case is the unending controversial E-levy, which has caused a lot of confusion in the country.
South Africa already taxes cryptocurrency trade and investment and is making plans to tax companies such as Netflix.