VAT in the Digital Economy: Practical Challenges to Implementing the Destination Principle and VAT Collection Mechanisms in Africa

Vollständiger Abstract

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VAT has become the most significant source of tax revenue in many African jurisdictions, rising to an average of 4.5% of gross domestic product in 2022. However, the practical application of the destination principle, which requires taxing final consumption in the jurisdiction of the consumer, and VAT collection mechanisms to support the destination principle, especially on supplies of cross-border services and intangibles, remains technically and administratively challenging. While some countries in Africa have introduced VAT rules on digital services with measurable revenue gains, the adoption of similar rules remains limited across much of the continent. In this article, the authors examine the implementation of internationally agreed standards on cross-border VAT in African countries, highlighting varying approaches adopted by African countries.