RELEASED OECD MULTILATERAL CONVENTION ON AMOUNT A: WHAT DOES THIS MEAN FOR AFRICAN COUNTRIES?

Pretoria, 11^th October 2023,

The taxation challenges arising from the digitalisation of the economy, and the associated revenue loss,  have been an area of major concern for Africa for many years. Many countries, including ATAF members report difficulties in taxing highly digitalized businesses as their economies get more and more digitalized. The current global tax rules are not fit for purpose for taxing such a digitalised global economy, and the domestic rules of most countries are also not appropriate for the taxation of such businesses.

In response to the concerns raised by ATAF members,  ATAF published a policy brief in 2020 to assist its members in their tax policy consideration of how to tax digital firms. Following the publishing of that policy brief ATAF published its Suggested Approach to Drafting Digital Services Tax Legislation which set out various options for drafting Digital Services Tax (DST) rules. Some African countries have started considering whether to enact DST legislation, but some stated they would await the outcome of the Inclusive Framework negotiations on Amount A of Pillar One; which aims to address the taxation of the largest and most profitable digital firms.

In July 2023 the Inclusive Framework issued an Outcome Statement by its members, stating that the Inclusive Framework had delivered a text of an Amount A Multilateral Convention (MLC), which would be opened in the second half of 2023, and a signing ceremony will be organised by year end; with the objective of enabling the MLC to enter into force in 2025.

Today, the OECD Inclusive Framework released the text of the MLC together with its Explanatory Statement. Further the statement says “As noted in the MLC, there are different views on a handful of specific items noted in footnotes by a small number of jurisdictions, who are constructively engaged in resolving these differences”.

Following the release of this statement, some members have expressed concern that clearly there may be further delay before the MLC comes into force; signalling continued loss of revenue from non-taxation of the digital economy. They are also concerned at the length and complexity of the Amount A rules as the published MLC and Explanatory statement text is 850 pages long reflecting the complexity of the proposed Amount A rules. 

To assist ATAF members unpack the Amount A MLC and gain a high-level understanding of its implications, as well as  alternate options available to countries for taxing digital firms, ATAF will be holding a webinar on 17th October setting out the main features of Amount A and the said options.

Logan Wort, the ATAF Executive Secretary, stated that the current global tax rules do not allow for African countries to tax digitalised businesses effectively. “It is vital that African countries effectively tax highly digitalised businesses, which is not possible under the current global tax rules. As indicated by our membership, Amount A is not only complex but more concerning is the uncertainty of when it will be implemented, meaning a continued lack of opportunity to tax the growing digital economy. This webinar will help African countries in their deliberations on the policy options available to them to tax these digital businesses” He said.

ATAF remains committed to supporting African countries to better comprehend what is at stake in these global reforms and this webinar is one in the planned series.

ENDS

For media inquiries please contact:

Nshimiyimana Fikiri

Communications Manager,

ATAF

Tel: +27636893901

Email: fikirin@ataftax.org

About ATAF

The African Tax Administration Forum (ATAF) is a platform that brings together African tax administrations to engage in mutually beneficial discussions and capacity-building initiatives. ATAF works towards promoting efficient and effective tax systems that contribute to the sustainable development of African nations.



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