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 laid before the Ministry of Finance and Economic Planning where it will undergo several procedures before implementation, if approved.
Jean-Louis Kaliningondo, the Deputy Commissioner General of the RRA said “When you pay for services such as Netflix, you are using money that you have generated in Rwanda”. As such, “why don’t we collect VAT on these services?” since “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?”, the Deputy Commissioner General of the RRA quizzed.
The Deputy Commissioner General of RRA further noted that one of the big principles about VAT is that, it is paid to the country where the service is being consumed. He averred that “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”.
African countries scaling up efforts to tax online activities
A number of African countries have plans to expand 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. For instance, Ghana has also announced that it will start taxing e-commerce and online gaming activities from April this year.
However, African governments still face a lot of criticisms on their intentions to tax digital/online services. Meanwhile, South Africa already taxes cryptocurrency trade and investment and is making plans to tax companies such as Netflix.
Netflix wants to “rapidly” increase its offer of African content, some of which have met with great success outside the continent.
Netflix, regarded as the world’s leading premium media streaming platform, operating in nearly every country in the world, disclosed that it is working to support the industry by promoting “new talent” and the training of “highly qualified” professionals to overcome the current limitations it faces in Africa.
Netflix to rapidly increase African content
Ben Amadasun, the Nigerian in charge of Africa original content and acquisitions for the American platform, during a visit to Paris said “we are seeing that there is a limit to how many very high level producers they are on this market. So, we are working very actively to support the industries and the ecosystem with training schemes and other initiatives that we have put into place in the last year and a half”.
Ben Amadasun further said “We are also looking at emerging talents in Africa and trying to see how we can develop them because their stories could be quite impactful as well”. He emphasized that “we have to make sure that we are able to bring some of their stories and have those diverse voices representing in terms of our overall offering in the market”.
Spurred by a young population and increasing internet connectivity, Africa’s entertainment space, including video streaming services is gaining a larger audience and receiving record amounts of funding.
The number of subscription video-on-demand users in Africa is projected to reach more than 5 million by the end of this year, and triple to 15 million by 2026, according to a new projection by Digital TV Research, a London-based business intelligence company.
Netflix is expected to have the highest number of subscribers both at the end of this year, at 2.61 million, and by 2026, when it is anticipated to have around 5.84 million.
Netflix is a streaming service that offers a wide variety of award-winning TV shows, movies, anime, documentaries, and more on thousands of internet-connected devices.
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