PwC Africa takes great pleasure in presenting the eighth edition of the VAT in Africa Guide – Africa re-emerging. This backdrop of renewal informs our theme and purpose of focusing on the re-emergence of African economies and societies which have been affected by the COVID-19 pandemic.
This edition, which has been compiled by PwC Africa’s indirect tax experts, covers a total of 41 African countries. It is geared towards sharing insight with our clients based on the constantly changing tax environments that can have a significant impact on business operations.
Within Africa, many governments continue to focus on expanding the tax net by improving revenue collection through efficient compliance systems and procedures. PwC Africa has observed that revenue authorities also continue to take a keen interest in indirect taxes as part of revenue mobilisation initiatives.
ESG
Key strides have been made within the Environmental, Social and Governance (ESG) space. “ESG leadership, strategizing and reporting is essential now for organisations that wish to flourish and remain relevant,” says Job Kabochi, PwC Africa’s Indirect Tax Leader. He adds that companies need to consider how ESG and tax intersect, since tax is a significant value driver when businesses need to deliver on their ESG goals.
“ESG standards are rapidly expanding to include taxes paid, and governments are progressively using tax incentives for sustainability to encourage responsible corporate behaviour and meet sustainability goals,” Kabochi says.
“At PwC, we are continuously focused on our renewed global strategy, The New Equation. Through this strategy, a key focus area for PwC Africa is to support clients in adding value to their ESG ambitions and building trust through sustained outcomes,” Kabochi says.
The New Equation is also an acknowledgement of the fundamental changes in the business environment in which PwC’s clients and other stakeholders operate. PwC continues to reinvent and adapt to these changes as a community of problem solvers, combining knowledge and human-led technology to deliver quality services and value.
PwC Africa Tax Leader, Taiwo Oyedele, says:“VAT is increasingly coming under focus given the need for governments across the world, and in Africa, to mobilise revenue in order to balance the budget deficits created during the pandemic. At the same time, the various interventions by monetary authorities have resulted in rising inflation with VAT playing a key role in the pricing of goods and services.”
Enforcement of atypical taxes
As we continue to monitor regional changes across the continent, PwC Africa has noted some atypical taxes on certain transaction types.
In Ghana, the government has rolled out an electronic transactions levy (E-levy) of 1.5% on the value of digital transactions above a daily threshold of GH₵100. Similarly, Chad introduced a tax on money transfer effective January 2022, that applies to transactions carried out by any means that leaves a trace. This could be in the form of electronic, mobile telephone, telegraphic or fax means, or cash withdrawals related to transfers by financial institutions and multinational network operators.
Taxation of the digital economy
Another notable trend has been the operationalisation of dormant aspects of the law, with a particular laser focus on the digital economy.
In Egypt the Tax Authority has established an e-commerce unit to regulate the digital economy inside the country touching on both electronic goods and services. While in Mauritius, the Finance Act of 2020 introduced VAT on digital or electronic services. In this case, VAT is chargeable on any digital or electronic service supplied by a foreign supplier to a person in Mauritius.
Zambia has also shown an interest in digital economy taxation, with similar initiatives currently underway.
“There is a growing trend to impose VAT on foreign digital transactions especially by countries favouring unilateral tax measures over the global deal on the taxation of the digital economy,” Oyedele says. “This is not only an emerging source of revenue for the government but also a policy tool. Therefore organisations in Africa need to be agile to manage this trend and the inherent challenges that will emerge.”
Our PwC Africa team of experts are available to answer any questions you may have on the topics covered in this VAT Guide. Their contacts are included for each country section in the report.