15/02/2023 – The acceleration of growth in e-commerce in Africa underscores the importance of securing the more effective collection of value added taxes (VAT) on the growing volume of online sales. A new toolkit released today offers timely and valuable assistance to African tax administrations for the effective collection of VAT revenues on e-commerce.
The VAT Digital Toolkit for Africa provides detailed guidance for the successful implementation of a comprehensive VAT strategy directed at e-commerce. With VAT the single largest source of tax revenue in African jurisdictions on average, the toolkit aims to help governments in Africa secure increasingly significant VAT revenues and to ensure a level playing field between traditional bricks-and-mortar businesses and foreign online merchants.
The VAT challenges of e-commerce growth primarily concern the collection of the tax on booming sales of online services and digital products to private consumers ("apps", streaming, gaming, ride-hailing, etc.) and on online sales of low-value imported goods, often by foreign merchants. VAT may often not be levied effectively on these sales under existing rules in African jurisdictions. Although VAT is a crucial source of tax revenue in Africa, many jurisdictions have not yet implemented the necessary VAT measures to address the challenges arising from the digitalisation of the economy.
The new toolkit is directed at all types of e-commerce and takes account of Africa's specific needs and circumstances. It covers all of the key design, administrative and operational elements of implementing major VAT reforms for the taxation of international e-commerce, including: policy design and legislative reform; building the infrastructure to support registration and ongoing compliance processes; communication strategy; effective audit and risk management strategies, including concrete measures to tackle VAT fraud associated with online trade. The toolkit has been developed in close consultation with tax administrations across Africa.
The VAT Digital Toolkit for Africa was produced through a partnership of the OECD, World Bank Group and the African Tax Administration Forum (ATAF). It is last in a series of three regional VAT digital toolkits, following publication of editions for Latin America and the Caribbean and for Asia-Pacific. The project to produce these regional toolkits was a direct response to expressions of interest from a growing number of countries, particularly developing and emerging economies, for more detailed practical guidance on the effective implementation and ongoing administration of the OECD's international VAT standards and recommendations. This work belongs to a wider strategy of the OECD to address the tax challenges arising from the digitalisation of the economy.
For more information on the VAT Digital Toolkit for Africa, including a brochure outlining the core recommendations, visit: https://oe.cd/vat-digital-toolkit-africa
A dedicated session on VAT at the OECD Tax and Development Days 2024 on 16 February will cover the regional VAT digital toolkits and the advancement of a significant technical assistance programme to support developing economies. Register to attend.
Media queries should be directed to Kurt Van Dender, Acting Head of the OECD's Tax Policy and Statistics Division (+33 1 45 24 88 66) and to Piet Battiau, Head of the Consumption Taxes Unit (+33 1 45 24 95 91).