Why is Africa not firm on tax evasion by Tech Giants?
Google recently announced that from June this year the platform will start deducting US tax from the earnings of creators outside the United States including Africa who monetize their content on Adsense.
The tech giant said that “Google will be required to deduct U.S. taxes from payments to creators outside of the U.S. later this year (as early as June 2021).” Warning that, “if your tax info isn’t provided by May 31, 2021, Google may be required to deduct up to 24% of your total earnings worldwide.”
The said deduction which will be done on monthly basis will affect revenue generated by creators through ad views, YouTube Premium, Super Chat, Super Stickers, and Channel Memberships by users in the United States.
According to Google, the decision is informed by Chapter 3 of the U.S. Internal Revenue Code which demands that the globally used platform collect tax info from all monetizing creators outside of the U.S. and deduct taxes in certain instances when they earn income from viewers in the U.S.
This announcement raises a concern on how tech giants are quick to respond to tax demands from powerful countries like the US, France, UK and the rest but would engage in tax evasion in Africa; paying little or virtually nothing after generating billions of dollars in revenue through their operations on the continent. A typical example is how Facebook for instance was forced by the French government to pay €106m (£95.7m) in taxes covering a decade operation in France from 2009 to 2019 plus an additional €8.46m covering 2020.
Research revealed Internet use across Africa skyrocketed from 2.1% in 2005 to 24% by 2018. This number continues growing till date, expanding the revenue base of these tech giants such as Google, Microsoft, Facebook Inc, Amazon, among others on the continent. However, this has not reflected fairly in taxes paid to African countries.
ActionAid, a British nongovernmental organization released an earlier report which states that 20 countries in the global south, including 12 countries in sub-Saharan Africa could be missing out on up to $2.8 billion (€2.3 billion) in tax revenue from Facebook, Microsoft, and Google’s parent company, Alphabet.
Explaining how some of these Tech companies evade tax in Africa, South Africa’s Tax Consulting said that, “some tech giants make use of the ‘Double Irish with a Dutch Sandwich’ tax avoidance scheme to route profits to low or no tax jurisdictions.” Adding further that, “the technique involves sending profits to one Irish company, then to a Dutch company and finally to a second Irish firm established in a tax haven such as Mauritius.”
This has gone on for a long time. What is the way forward for the continent in terms of ceiling the tax net? How do we make sure Tech Giants pay a fair share of what they earn on the continent? Should there be a minimum tax rate across Africa? let’s discuss this very important topic