Last week Fortune magazine reported that Indonesia and Google are about to reach an agreement whereby the later would pay back taxes of more than $400 million on profits it made in that country over the past 5 years. This came after UK and other countries have become aggressive on dotcoms who have been hiding in the dark as their transactions take place on the web with no physical exchange of goods but rather services. Early this year the UK fined Google $185 million in back taxes to settle a probe by Britain’s tax authority, which had challenged the company’s low tax returns for the years since 2005.
Zimbabwe Revenue Authority (ZIMRA) should look at such avenues to increase the tax base and not pry on already complying local companies who are overburdened with compliance, political and business issues to deal with. Dotcoms which are dominant in Zimbabwe are mainly Facebook and Google and a lot of Zimbabwean companies and individuals pay for advertising and SEO respectively on the two digital giants. So whenever you see a Sir Wicknell, Rev Frank Buyanga or Bakers Inn advert on your feeds in Facebook; it means they have paid Facebook for those adverts to appear on your news feeds. When you search for ‘Econet Wireless’ on google and see them at the very top of search results with a green ‘Ad’ sticker next to their website address; Econet has paid Google to have prominence on their search engine.
Currently, ZIMRA is not collecting any revenue from these earnings that Facebook and Google are making in the Zimbabwean market. Facebook and Google clients pay directly using debit or credit cards on their sites and none of the two tech giants have offices in Zimbabwe where ZIMRA can collect their fair share of taxes. ZIMRA could adopt the SARS response which will force all companies in Zimbabwe to use a tax registered advertiser to make their Facebook and Google payments. Perhaps Limbikani and his team at TechZim could champion for this process as it is widely seen as the leading player in that space.
South Africa’s SARS response
South Africa has made it mandatory for local companies who seek online advertising to use locally registered companies such as The Creative Counsel so that their tax authority can tax the transaction. Any company found circumventing this will face fines and penalties from South African Revenue Service (SARS).
In 2014 a Google spokesperson commented on the company’s tax compliance in South Africa saying the company complies with tax laws in South Africa and every country where it operates; “Under current rules, VAT reporting and remittance is the responsibility of our advertisers, who pay the same rate when they advertise with Google or any other company.”
The spokesperson also highlighted that Google partners with publishers around the world who choose to list themselves in Google News. Through these relationships, Google is able to send users to news sites over 10 billion times a month from Google News and Search – each click representing a business opportunity.
In 2013 Google paid out more than $9bn with AdSense partners globally.