Zimbabwe has started the year with a significant shift in its tax policy. A new 15% withholding tax has been imposed on digital services.
This tax affects payments to international giants like Netflix, Starlink, InDrive, and Bolt, among others. But what does this really mean for ordinary Zimbabweans? Let us break it down.
This new tax is essentially a levy on payments made to these international digital service providers.
If you subscribe to Netflix, or use Starlink for internet, or hail a ride with InDrive or Bolt, 15% of what you pay will now go to the government. Payment service providers, like banks, are responsible for collecting this tax. Stanbic Bank, for example, has already informed its customers that this tax is in effect, starting from January 1, as outlined in the 2026 Finance Act.
The bank has made it clear the tax applies to the total amount of the transaction. This ensures that these offshore companies receive their full payment, while Zimbabwe's tax obligations are also met.
The government's reasoning behind this move is quite clear.
Finance Minister Mthuli Ncube has pointed out that the digital economy is booming. Foreign digital platforms are providing services directly to Zimbabweans. They do this without needing a physical presence in the country.
These services include everything from ride-hailing apps to streaming services, satellite internet, and a host of other online platforms.
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The government believes these multinational companies are generating significant income from Zimbabwean consumers and businesses. Therefore, they argue, it is only fair to tax these digital services.
So, how will this tax affect the average Zimbabwean consumer? The most immediate impact will likely be higher prices. Companies like Netflix and Starlink might choose to pass this 15% tax on to their customers.
This means Zimbabweans will have to pay more for these services. For those already struggling with the high cost of living, this extra expense could be a burden. It might force some to cut back on their subscriptions or find cheaper alternatives. Access to digital services, which have become increasingly important for education, entertainment, and communication, could become more limited for some.
The impact on businesses is also worth considering.
Local businesses that rely on these digital services, for example, for advertising or e-commerce, will also face increased costs. This could affect their profitability and competitiveness.
International companies providing digital services in Zimbabwe will need to adjust to this new tax regime. Some might find it less attractive to operate in Zimbabwe, potentially reducing the availability of these services.
However, the government hopes the tax revenue generated will benefit the economy as a whole, which could indirectly benefit businesses.
Zimbabwe is not alone in trying to tax the digital economy. Many countries around the world are grappling with how to tax these international digital giants.
Some countries have introduced similar digital services taxes, while others are exploring different approaches, such as requiring these companies to have a physical presence or collecting value-added tax (VAT).
The Organisation for Economic Co-operation and Development (OECD) has been working on a global framework for taxing the digital economy, but reaching a consensus has been challenging. Zimbabwe's approach is one of many attempts to capture revenue from the rapidly growing digital sector.
One potential benefit of this tax is increased government revenue.
The money collected could be used to fund public services, such as education, healthcare, and infrastructure development.
In a country facing economic challenges, every additional revenue stream can make a difference.
The government hopes that this tax will contribute to a more sustainable fiscal position. This additional income for the government could translate to positive change in the country if allocated correctly.
However, there are also potential drawbacks to consider. As mentioned earlier, the tax could increase costs for consumers and businesses. It could also make it more difficult for Zimbabweans to access digital services, widening the digital divide. Some argue that the tax could stifle innovation and economic growth.
There is also the risk that companies might try to evade the tax, reducing its effectiveness. The government must monitor the impact of the tax and make adjustments as needed.
Are there alternative or complementary solutions that Zimbabwe could consider? One option would be to focus on simplifying the tax system and improving tax compliance across all sectors of the economy.
This could generate more revenue without disproportionately burdening the digital sector.
Another approach would be to invest in digital literacy and infrastructure, making it easier for Zimbabweans to participate in the digital economy.
The government could also explore partnerships with international organisations and other countries to develop a more comprehensive and equitable approach to taxing the digital economy. Encouraging local digital entrepreneurship is also a viable path to explore.
In the end, Zimbabwe's new 15% withholding tax on digital services is a complex issue with potential benefits and drawbacks.
While it could generate much-needed revenue for the government, it also risks increasing costs for consumers and businesses and limiting access to digital services. As a nation, we need to closely monitor the impact of this tax, explore alternative solutions, and ensure it contributes to a more inclusive and sustainable digital economy for all Zimbabweans.
Only time will tell if this is a step forward or a stumble in our journey towards economic prosperity.
- Sagomba is a doctor of philosophy, who specialises in AI, ethics and policy researcher, AI governance and policy consultant, ethics of war and peace research consultant, political philosophy and also a chartered marketer. — esagomba@ gmail.com/ LinkedIn; @Dr. Evans Sagomba/ X: @esagomba.
