Nigeria and Egypt test different approaches to tax digital economy

Nigeria and Egypt test different approaches to tax digital economy

The booming digital economy in many African countries like Nigeria and Egypt raises the hopes for more revenues for the countries in their COVID-19 fatigued economies.

More tax revenues derived from the digital economy could help governments of African countries save their crumbling education and healthcare systems.

But much of these funds from the digital economy are being sucked out of the continent by non-resident multinational enterprises (MNEs). These companies escape taxes on the profit they make in various countries because of the age-old international tax rules which require companies to be physically present in a country to be taxed by the country.

While the problem is global, there has yet to be a universally accepted consensus on how to tackle it. This collaborative report examines the different approaches of Egypt, which has joined a global plan to tax such companies, and Nigeria, which has decided to act unilaterally.

Countries lose between $100bn and $240bn annually to Base Erosion and Profit Shifting (BEPS), says the Organisation for Economic Cooperation and Cooperation (OECD), a group of 37 democracies with market-based economies.

BEPS activities refer to tax planning strategies adopted by companies to artificially shift profits to locations with no or low tax rates and no or