PwC Africa has released the seventh edition of its Africa VAT Guide, comprising updates on VAT regimes in 41 African countries.
With the theme of “Moving towards a united Africa”, this edition is focused on Africa’s journey into the future and how different countries’ VAT regimes help to shape that journey.
PwC’s Africa VAT Guide is compiled by PwC indirect tax experts with hands-on experience in each of the 41 countries represented in the report.
“The impact of the Covid-19 pandemic and other developments on the continent have caused a rapid shift to virtual, remote operations and new ways of working,” says Job Kabochi, PwC Africa’s indirect tax leader. “Through this publication, we’re looking ahead and preparing for the future. This report includes insight on the emerging technology ecosystem in Africa – as well as other, more traditional aspects of VAT regimes in each country.”
Additionally, the African Continental Free Trade Area agreement (AfCFTA) came into force on 1 January 2021 and offers opportunities for economic recovery and the development of a powerful economic trading bloc.
“AfCFTA has helped to actualise the long-standing intention of increasing trade among African countries,” continued Kabochi. “As cross-border trade ramps up, we expect greater attention to be paid to indirect taxes such as customs duties, VAT and excise duty. Accordingly, we have given special attention to the taxation of cross-border supply of both goods and services in this edition of the Africa VAT Guide.”
Many African governments are prioritising enhanced compliance as a way to address tax revenue shortfalls and protect the existing tax base. PwC’s 2021 Africa VAT Guide highlights compliance-related initiatives such as the adoption of real-time VAT reporting and data analysis by various tax administrations to shore up their collections.
Matthew Besanko, indirect tax partner at PwC South Africa adds: “Countries in sub-Saharan Africa have sought to mitigate the impact of the Covid-19 pandemic by making changes to their respective tax regimes. While some of these changes relate to protection of the tax base, other concessions were introduced to ease regulatory burdens and financial constraints on individuals as well as companies.”
Unlike other jurisdictions, however, South Africa did not introduce a reduced VAT rate or grant concessions in terms of making VAT payments.
Apart from VAT, there have also been other changes to indirect taxes in South Africa. We have seen the introduction of a carbon emissions tax as well as new levies on plastic bags. The government has also sought to supplement its revenue base by the introduction of above inflationary increases on the consumption of alcohol and tobacco products.
We have also seen a number of landmark court cases handed down in recent months. These cases provide judicial guidance and are signs of a maturing VAT system.
“The coming into effect of AfCFTA could not have come at a better time and creates a great opportunity for African countries to work together. This agreement creates a unified continental market,” Besanko comments.