As the digital economy takes on a more prominent role in global commerce, African nations are working to improve the regulation of digital activity. Senegal is viewing digital taxation as a key tool for asserting its sovereignty and boosting its resources in an era dominated by major online companies.

Senegal collected over one billion CFA francs, equivalent to more than $1.7 million, in 2024 from its recently introduced value-added tax (VAT) on digital services, the country's tax authority announced. Jean Koné, the Director General of Taxes and Domains (DGID), revealed the results on Tuesday, April 15, during the international conference on digital economy taxation in Africa, held in Dakar.

Encouraged by these initial returns, the tax administration intends to intensify its efforts to collect even greater resources in the coming years. "We will implement strategies and innovate to ensure everyone pays the digital VAT. It is also about adapting our system to make it more inclusive and efficient," Koné said. Over the medium term, the government is targeting revenues between 3 and 5 billion CFA francs, with projections reaching as high as 10 billion.

Implemented on July 1, 2024, the tax applies to services provided by both domestic companies and foreign digital platforms operating within Senegal. Unlike a flat tax, the taxable base is calculated from the actual turnover of non-resident providers, based on compensation received or owed. This method more accurately reflects the revenue generated within the Senegalese market.

Senegal's standard VAT rate is set at 18%, with a specific 10% reduced rate for sectors facing difficulties, such as hospitality and restaurants, which were impacted by the COVID-19 pandemic. The tax specifically targets streaming services, software subscriptions (SaaS), cloud computing, online advertising, downloadable games, and paid mobile applications.

While the measure increases state revenues, it also carries implications for consumers. By taxing platforms based on their actual income, the prices of certain digital services could increase, potentially excluding the most vulnerable populations. The key challenge for authorities will be to balance tax efficiency with digital accessibility, ensuring that digital transformation does not come at the cost of inclusion.

By Samira Njoya,

Editing by Sèna D. B. de Sodji