What Does the G7 Proposal on Taxation of the Digitalised Economy Mean for African countries?

This policy brief examines the impact of the G7's proposal on the taxation of the digitalised economy on African countries, arguing that the US-led amendments to the OECD/G20 Inclusive Framework (IF) favor developed nations and risk reducing tax revenues for developing economies.

• Current international tax rules allow Multi-National Enterprises (MNEs) to avoid paying taxes in African market jurisdictions because they only require a physical presence for taxation, a loophole exploited by companies operating digitally and remotely.
• The US-led G7 proposal significantly narrowed the scope of Pillar 1, restricting it to approximately 100 MNEs with revenue thresholds of USD 20 billion and profitability of 10%, which excludes most MNEs operating in Africa.
• The proposed 15% global minimum Effective Tax Rate (ETR) under Pillar 2 may lead to African countries losing tax revenue to developed nations via the Income Inclusion Rule, particularly where domestic effective rates are lower due to incentives or deemed profit taxation.
• The G7 proposal requires the removal of unilateral measures such as Digital Service Taxes (DST) and Significant Economic Presence (SEP) rules, which could result in negative revenue returns for African countries that derive little benefit from Pillar 1.
• There is a significant disparity in the projected distribution of additional revenue from Pillar 2, with the Tax Justice Network estimating that the G7 will receive 60% of the revenue despite representing only 10% of the world's population.
• The document advocates for a global tax body under the UN to ensure greater legitimacy and equity, and suggests a 'minimum effective tax rate' (METR) strategy using a Formulary Apportionment Rule as a fairer alternative for African countries.

APA

Mustapha, M. N., & Nyamudzanga, L. (2021). What Does the G7 Proposal on Taxation of the Digitalised Economy Mean for African countries? Africa Policy Research Institute. https://afripoli.org/what-does-the-g7-proposal-on-taxation-of-the-digitalised-economy-mean-for-african-countries

Chicago

Mustapha, Mustapha Ndajiwo, and Learnmore Nyamudzanga. What Does the G7 Proposal on Taxation of the Digitalised Economy Mean for African countries? Africa Policy Research Institute, 2021. https://afripoli.org/what-does-the-g7-proposal-on-taxation-of-the-digitalised-economy-mean-for-african-countries.

Wikipedia

{{cite report |last1=Mustapha |first1=Mustapha Ndajiwo |last2=Nyamudzanga |first2=Learnmore |title=What Does the G7 Proposal on Taxation of the Digitalised Economy Mean for African countries? |publisher=Africa Policy Research Institute |date=3 September 2021 |url=https://afripoli.org/what-does-the-g7-proposal-on-taxation-of-the-digitalised-economy-mean-for-african-countries |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{mustapha2021what, author = {Mustapha, Mustapha Ndajiwo and Nyamudzanga, Learnmore}, title = {{What Does the G7 Proposal on Taxation of the Digitalised Economy Mean for African countries?}}, institution = {Africa Policy Research Institute}, year = {2021}, month = sep, url = {https://afripoli.org/what-does-the-g7-proposal-on-taxation-of-the-digitalised-economy-mean-for-african-countries}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }