He said that currently, digital companies were able to avoid paying taxes because they did not need physical offices and stores to sell their goods and services to consumers in a particular country.

He noted that the inherent characteristics of digital transactions made it particularly easy for enterprises to limit their tax liabilities and sometimes utilise that forum to evade tax in the digital economy.

Broader stakeholder consultation

Speaking at the 10th annual International Tax Conference 2022 in Accra, Prof. Gatsi, who is also the Dean of the Business School at the University of Cape Coast, recommended that countries in Africa consider introducing digital presence tax.

“Developing continental taxation principles for online advertising of goods and services is therefore a step in the right direction. A digital presence tax should be subjected to bilateral and multilateral agreements between the state in which the foreign company has a digital presence and the state in which the foreign company is incorporated and is a tax payer.”

“These agreements must allow for autocratic exchange of tax information,” he said.

A digital economy is defined as the global network of economic and social activities that are enabled by platforms such as the internet, mobile and sensor networks.

The tax conference was organised by the Chartered Institute of Taxation, Ghana and was on the theme, “Improving Domestic Tax Revenue Mobilisation: A Consultative and Inclusive Approach.”

Digital economy

There is a growing global consensus that the digital economy is relatively undertaxed, compared to traditional businesses.

According to the World Bank, the digital economy is equivalent to 15.5 per cent of the global economy, growing two and a half times faster than the global gross domestic product (GDP) over the past 15 years.

Challenges

Prof. Gatsi said some challenges distorted the contribution of the African digital economy to growth.

He cited attempts to develop a digital tax framework without broader stakeholder consultation resulted in implementation challenges.

Also, he said the framework for digital taxation were developed for current fiscal solution rather than progressive contribution of the digital economy to taxation.

Prospects

Prof. Gatsi said taxing the digital economy offered more opportunities for emerging and developing countries such as enhanced tax base and deepened partnership relations with taxpayers.

“Digitisation has resulted in increased innovation, efficiency and offers opportunities for job creation and enhanced tax base.”

“The comfort and efficiency of online interactions also minimise the need for personal contacts between taxpayers and tax officials, which reduces corruption risks in the process of local tax administration,” he said.