macroafricaintel | Tax social media at your peril

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

African countries have low tax bases not necessarily because their authorities do not desire the revenue but often due to the cost of acquiring it. With significant portions of their populations in the informal economy, there are not many options available to tax authorities to assess income. More financial inclusion should make their jobs easier over time. But what about now? The ubiquity of mobile phones, smartphones especially, and the proliferation of social media, could be a less expensive means by which to assess how much people earn. Oftentimes, it is not that citizens do not wish to pay tax. But dealing with public institutions in most African countries is not only sometimes frustrating but potentially punitive.

Authorities are better off just taxing their citizens’ consumption. Value-added tax (VAT) tends to be an effective tool in this regard. In some African countries, the telecommunication sector tends to be either exempt from VAT or allowed concessionary rates to engender digital inclusion. Considering how endeared many are to their mobile phones, any measure that makes it more expensive to use them could be politically costly, however. When Nigeria, a country where there is extreme sensitivity to any measure that could potentially stifle internet freedom, first flirted with the idea of a “communication services tax”, the uproar was deafening. But with almost $800 million in potential annual revenue, it was too tempting a proposition for the authorities. Some African authorities are not as encumbered. At least, so it seemed at first.

In March, Uganda announced a so-called social media tax. Not that the authorities did not already tax voice and data communications. But they did not tax data usage as much as they did phone calls. Planned for July, data usage on social media platforms like Facebook, Twitter, WhatsApp, Skype and Viber would be taxed more; according to the proposal then. The move was motivated in part because of the authorities’ strained finances, it seems. Volatile and hitherto low commodity prices are one of the reasons why. Burgeoning debt stocks and disproportionate portions of revenue used to service them, are another. Consequently, African tax authorities have little choice to but to seek new ways to raise more revenue.

Touching a nerve
Many African authorities have been looking to tax the purchase of data for internet use by their citizens more heavily for a while now. The potential revenue figures are eye-watering certainly. But there is another motivation, it is believed. Some African authorities, increasingly irritated by criticisms on the internet, might not mind that the social media habits of their citizens be a little bit more expensive. Take the Ugandan example; President Yoweri Museveni was not shy about his desire to make gossip via social media a very dear endeavour via the new digital taxes he mooted. Not that the authorities do not already assert some form of control over social media and other forms of internet usage. Like China, African authorities are becoming adept at switching off the internet, making it slow, or restricting its usage, during crucial politically sensitive events like elections, protests and so on.

But higher taxation on internet usage could be a more effective and less expensive way to do that for the authorities with such aims. Since if the habit weighs on the purse, people are likely to choose the words they publish on social media more carefully of their own volition. Public opinion would definitely be stifled as a result. But there is also the possiblity that the proliferation of fake news might reduce. Perhaps then, it is only a matter of time before other African countries begin to flirt with Mr Museveni’s idea. Even so, there are limits to how far the authorities can push the envelope. Because unlike the quasi-dictatorships cloaked in democratic garments in countries like Uganda and Rwanda, some African leaders, especially those with crucial elections to win, can ill-afford to alienate citizens.

Turns out Mr Museveni is not totally insensitive to public opinion: he has shelved the planned social media tax. In fact, his government now says no such proposal was ever made: “There is nothing like social media tax. There is no such proposal. That is not what the president proposed. No one will tax you for using WhatsApp and Facebook”, says Ugandan information minister Frank Tumwebaze. Is Mr Museveni’s counterpart in Tanzania, John Magufuli, who recently ordered that bloggers pay a $930 fee to legally do what is ideally free, likely to be similarly sensitive? No matter. He will fail.

macroafricaintel | Can Africa win Trump over?

By Rafiq Raji, PhD

In mid-May, at the Africa Finance Corporation’s 10th year anniversary infrastructure summit (“AFC Live 2017”) held in Abuja, I asked Jay Ireland, the president and chief executive of GE Africa – the subsidiary of the American industrial giant on the continent – about his thoughts on whether Donald Trump, the American president, would be good or bad for Africa. Specifically, I wanted to know if President Trump would be worth the trouble of winning over. As Mr Trump does not know much about Africa, if the little mention the continent got during his election campaign is anything to go by, engaging with him early on might spring pleasant surprises, some pundits argue. Despite such assurances, I remained a little sceptical. So the opportunity to ask Mr Ireland, who incidentally is also the chair of former President Barack Obama’s Advisory Council on Doing Business in Africa and co-chair of the US Africa Business Centre, which leads the American business community’s engagement activities on the continent, was huge. In a sign of the times and the peculiar style of the current American president, Mr Ireland demurred, humorously wondering if his answer might not become the “subject of a tweet.” More importantly, he said a strong case was being made to the Trump administration to continue ongoing initiatives. I was particulary interested in the “Power Africa” programme initiated during the Obama administration; especially since even during Mr Obama’s tenure, it was floundering, talk less that of Mr Trump. The African Growth and Opportunity Act (AGOA), is not as vulnerable to a Trump rethink, albeit the administration could still exercise certain prerogatives over the choice of beneficiary countries and so on. My interpretation of Mr Ireland’s comments are as follows: Should Africa indeed not be a priority for Mr Trump, ongoing African initiatives may simply continue under the aegis of able and experienced technocrats at the American State department. And in the event Mr Trump suddenly develops a keen interest on African issues, proactive engagement with the administration like his and the business people he represents may be hugely differential. It has also been argued that African heads of state should do likewise.

Focus on first-order issues
In light of the recent exit from the Paris climate accord by Mr Trump, however, some are now beginning to think whether there is a need to even try. I would not be too quick to give up. True, with African countries already beginning to see the negative effects of climate change via droughts and so on, the recent American action is a setback. And of course, African countries initially had their own reservations about the accord. Not a few wondered why they should have to be environment-friendly at the expense of their development; especially as currently developed countries were not similarly cautious. But with research showing a nexus between climate change and increasing incidents of conflict in a number of African countries, there is a growing consensus about the need to be more caring of the Earth we live in. Still, to do this, African countries would require financial and technological support. To this end, the Paris agreement makes substantial provisions. With the American exit, however, also goes its financial commitments. It is also evidence that a Trump presidency would (at least for now) have second-order negative effects for Africa when the issues relate to broader international and multilateral arrangements that Mr Trump is averse to. So it is on the more specific African initiatives that African leaders should hope to influence him on.

Show respect
At the recent G7 summit in Italy, it was all too clear Mr Trump was not enjoying himself. He was particularly irritated by Emmanuel Macron’s (the French president) “macho-diplomacy”: Mr Macron’s overly firm and lingering handshake with Mr Trump at their very first meeting since the former’s inauguration was well-reported. As if determined to rattle the American president or put him to size, Mr Macron also made sure to refer to the incident afterwards as deliberate. That and another, where Mr Macron seem to be moving towards Mr Trump to shake hands, as the G7 leaders and invited guests did their traditional group-walk in front of the press, but at almost the last minute swerved to shake that of Angela Merkel, the German chancellor, must have been a little unnerving for a man known for his fragile ego. Thus, it is very likely that unpleasant experience was at least a secondary motivation for his action on the Paris accord. In his speech announcing the decision, Mr Trump was almost certainly taking aim at Mr Macron when he said: “I was elected to represent the citizens of Pittsburgh, not Paris.” (The Washington Post did a very insightful article on the dynamics leading to Mr Trump’s decision.) At the G7 summit it turns out, one of few instances where Mr Trump seemed to be enjoying himself was when he ran into some of the African delegates: Yemi Osinbajo (Nigeria), Alpha Conde (Guinea), Uhuru Kenyatta (Kenya), Hailemariam Desalegn (Ethiopia) and Akinwumi Adesina (African Development Bank). With deft handling, Mr Trump could become an ally.

Also published in my BusinessDay Nigeria newspaper column (Tuesdays). See link viz.

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