Let me start by defining what VAT is – Value Added Tax. VAT is a type of taxation that is charged on products (i.e. goods or services) in a way that is not direct like other types of taxes. You will notice that some taxes are charged on revenue or profits. However, VAT is charged on transactions instead. VAT is also charged when products are imported. In Zimbabwe, this type of tax has been in use for 16 years now. SI 273 of 2003 stipulates the dynamics of VAT in Zimbabwe. A standard rate of 14.5 per cent is used for VAT locally.
Facebook Informs Zimbabwean Advertisers Of The New Development
People with ad accounts recently started getting an email reading as follows:
“Due to the implementation of a value-added tax (VAT) in Zimbabwe, Facebook is required to charge VAT on the sale of ads to all advertisers in Zimbabwe. All advertisers with a business country of Zimbabwe will be charged an additional 14.5 per cent VAT on advertising services purchased on or after 1 September 2020.
You do not have to enter a Zimbabwe tax ID. However, if you are registered for VAT and provide your tax ID, your tax ID will show up on your ads receipts. This may help you recover any VAT that you paid to Zimbabwe tax authorities if you are a VAT registered business in Zimbabwe.
How to add your tax ID to your Zimbabwe ad account: Got to account settings, scroll down to the field labelled “Tax ID number”, and add your Zimbabwe tax ID. For additional information, please visit our Help Centre.
Thanks, The Facebook Business Team.”
Implications And Noteworthy Talking Points
E-Commerce And Taxation
This is one of the most topical issues regarding the growth of e-commerce globally. In most developed countries issues of taxation in the e-commerce industry have been streamlined. However, in most developing nations the issues are still contentious. Most governments, just like ours, feel they are losing out on a lot of revenue due to lack of frameworks regarding taxation in the e-commerce industry. One of the reasons it is hard to put in place such frameworks is because of limited technological infrastructure in Zimbabwe.
The interest in getting tax from internet-based companies has even been voiced by the Zimbabwean government before. When Finance Minister Mthuli Ncube presented the national budget last year he had this to say: “Income earned in Zimbabwe by foreign domiciled satellite broadcasting services and electronic commerce platforms is deemed to be a source in Zimbabwe for tax purposes. However, technological advancements have enabled foreign companies, particularly satellite broadcasters and e-commerce platforms to provide residents with services from offshore sources. This income is subject to tax and the activity generating the income is paid from a source within Zimbabwe. For the avoidance of doubt and to broaden the tax base, I propose to deem income earned by such non-resident service providers to be from a source within the country and liable to tax.”
The government wishes to realize revenue from activities done online. The argument that companies like Amazon, Netflix, and the like should pay taxes to Zimbabwe does sound logical.
ZIMRA And This New Development
The latest arrangement of VAT on Facebook ads is not necessarily fruition of the government’s wish. Why? This is because the VAT will be charged on Zimbabweans not Facebook per se. Thus we are yet to see companies like Facebook (and such like) being taxed in Zimbabwe.
A Look At Zimbabwean Advertisers On Facebook
There are two major things to look at here. One, just how many people in Zimbabwe advertise using paid ads on Facebook? My assumption is they are very limited in number. In earnest, I do not think there is much to be realized by ZIMRA from Facebook paid ads.
Two, this new development will most likely dissuade advertisers from using paid ads. It also could even discourage prospective advertisers from taking the paid ads route. Resultantly the whole scenario becomes akin to taking a step forward and two steps backwards.
E-commerce, particularly the use of paid ads in Zimbabwe is still in its infancy. The government should invest more in developing internet infrastructure to make access to internet services easier and cheaper. This will enhance the uptake of online services, a point at which taxation becomes automatic. As of now, I feel it is still too early to chase after revenue through taxes.