Taxes and Parafiscal Fees on Digital Infrastructure Services in Africa

This technical background paper evaluates the progress of African nations in establishing effective fiscal frameworks for digital infrastructure across the continent. Through a comprehensive comparative analysis of legislative, tax, and regulatory policies in over 20 African countries, the report synthesizes insights on the status and trends of telecom taxes and parafiscal fees, aiming to inform policy recommendations. The assessment reveals a notable wide range of approaches to taxing the sector, resulting in the application of additional taxes compared to other economic activities and a complex array of taxes and parafiscal fees that are not always aligned with tax principles and public administration principles. Taxes discriminate among economic activities; some are regressive, and others are difficult to administer. Parafiscal fees are not proportionate to the cost of providing the service or are not used as a mechanism to boost the sector's efficiency or achieve specific sector goals. Compared to levels observed in other sectors and regions, a high tax burden on telecom operators and telecom consumers characterizes the African telecom landscape. Establishing a clear revenue strategy that coherently links tax policy with tax administration is crucial for supporting economic transformation and the growth of the digital economy in Africa.