In the wake of Twitter starting to charge some money for verification, Angelo Musinguzi, a taxation expert, believes it is the right time for African countries to try to make the most of such services through taxing them.
Twitter announced on November 5 that it would begin charging customers $7.99 a month to receive a verification check mark on their profiles, one of a raft of product changes that the company has been discussing since Elon Musk’s takeover.
"I think it is the right time (to tax digital services), and I think the government should put up infrastructure to explore those transactions and tax them,” Musinguzi said.
He however noted that it is not very easy to tax such services because they operate online and are not registered in Rwanda.
However, he said, taxes from such firms can improve the country’s revenue and play a role in investment and development of the country.
In October, an official at the Rwanda Revenue Authority (RRA) told Doing Business that the country is lining up an extensive study to understand the dynamics of its digital economy.
Innocente Murasi, the Commissioner for Strategy and Risk Analysis at RRA, said the study will explore a number of "grey areas” that need to be understood as far as the local digital economy is concerned, so that policy makers will ably take appropriate decisions.
It will aim at finding out what digital services are consumed locally, their size, their suppliers and consumers, among other things.
"Like any other aspect of markets, we need to understand what services we are talking about when we refer to Rwanda’s digital economy,” Murasi said.
"Is it just services like Google and Netflix, or does it even cover the software that we purchase online? We have to define what we mean by digital services. Secondly, we need to explore who are the consumers, what is the size of the consumer base, and who are the suppliers?”
When they have laid hold on such information, and more, researchers are expected to make an analysis that will be submitted to policy makers for consideration so as to plan for the next steps of promoting Rwanda’s digital economy in line with the country’s development ambitions.
The RRA is still trying to collect primary data from institutions like the National Bank of Rwanda (BNR), telecom companies and the Rwanda Utilities Regulatory Authority (RURA).
It is expected that such data may be available to RRA by December. After that, the analysis will take shape.
"After getting such information on the digital services, we will try to learn from other countries and see how they are dealing with them. For example, we will look at the countries which managed to tax them; how they did it and what challenges that met. Then we will have to submit our findings to policy makers,” she added.
On an important note, Murasi noted, policy makers deliberate on whether decisions such as levying a Value Added Tax (VAT) on particular digital services will support what Rwanda wants to achieve in terms of deepening digital service usage or not.