Taxes: Does sharing economy point to changing dynamics?
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RE: “Africa’s app-based taxis battle Uber over market share” (The New Times, December 17). This is quite an informative article as it shows the positive benefits of such tech companies in what is known as the sharing economy. The sharing economy typically describes situations where the Internet is used to connect suppliers who are willing to provide services or use of assets – apartments for rent, cars for transportation services, etc.– to consumers.
These platforms are also used to connect workers and businesses for short-term work or what is known as online/freelancing work (source internet).
A report shows that the sharing economy worldwide is worth $100 billion. Uber and Airbnb are probably the most known shareconomy companies in Kigali. A perusal of AirbnB Kigali listings shows about 300 rooms/residences for rent. This is equivalent to Kigali Marriott Hotel with about 254 rooms. Marriott pays taxes from occupancy tax to sales tax among others. Herein lies the problem of shareconomies to African countries—tax revenue from sharing economies is African countries’ blind spot. Imagine losing tax revenue of a hotel the size of Marriott and this scenario is only set to become worse as technology grows further.
As for Uber, compare with your local Rwandan taxi operator who is registered with Rwanda Revenue Authority and Rwanda Utilities Regulatory Authority and has to pay licences and taxes versus the tax and licence ‘free’ Uber services.
Is it no wonder that Uber has faced stiff opposition from traditional taxi operators in Africa and elsewhere? The jury is still out on whether Uber is an unlicensed taxi company or a technology company meeting a market need.
Another example is online work. If I get a website development contract with a global client, obviously I will not pay income tax in Rwanda as opposed to a similar registered website development company in the country.
Lastly, regional e-commerce sites like the Kilimall site in Kenya that’s currently expanding to the rest of the region, mean that goods purchased are not subjected to the local VAT taxes in Rwanda.
As we in Africa celebrate the plug-in into the global economy through technology, our governments need to move fast and develop policies/regulations that will address the gap in revenue collection from these companies.