Taxing the Digital Economy: Bridging the Gap between the European Union and Africa

The document examines the OECD's two-pillar solution for digital taxation, noting that while the EU and most African Inclusive Framework (IF) members support it, significant gaps remain. African entities like the ATAF and G24 advocate for the redistribution of total profits rather than residual profits, higher minimum taxes, and non-binding dispute resolution. The author highlights that 'stabilization clauses' in investment treaties may prevent African countries from adjusting tax incentives to meet minimum tax rules without losing revenue to home states. The paper suggests the EU could support Africa through technical assistance and by advocating for transparent, regionalized arbitration centres.

• The OECD's two-pillar solution, agreed upon by 136 countries, includes Pillar One, which reallocates 25% of residual profits to market jurisdictions where Multinational Enterprises (MNEs) earn above EUR 1 million (large economies) or EUR 250,000 (small economies), and Pillar Two, which introduces a 15% minimum tax for MNEs with global revenues exceeding EUR 750 million.
• African bodies, including the African Tax Administration Forum (ATAF) and G24 countries, have raised objections to the OECD proposals, arguing that profit redistribution should be based on total profits rather than residual profits and that the reallocation of non-routine profit should be 30%.
• Nigeria and Kenya have expressed specific disappointments or concerns, with Nigeria citing the limited scope of Amount A, binding arbitration, and the potential requirement to withdraw unilateral taxation measures for companies without a physical presence.
• Developing countries face a risk where 'fiscal stabilization clauses' in existing investment treaties freeze tax terms, meaning they cannot easily repeal tax incentives to meet the 15% minimum tax without the home state exercising the right to tax that revenue.

APA

Wamuyu, R. (2021). Taxing the Digital Economy: Bridging the Gap between the European Union and Africa. Africa Policy Research Institute. https://afripoli.org/taxing-the-digital-economy-bridging-the-gap-between-the-european-union-and-africa

Chicago

Wamuyu, Ruth. Taxing the Digital Economy: Bridging the Gap between the European Union and Africa. Africa Policy Research Institute, 2021. https://afripoli.org/taxing-the-digital-economy-bridging-the-gap-between-the-european-union-and-africa.

Wikipedia

{{cite report |last1=Wamuyu |first1=Ruth |title=Taxing the Digital Economy: Bridging the Gap between the European Union and Africa |publisher=Africa Policy Research Institute |date=23 November 2021 |url=https://afripoli.org/taxing-the-digital-economy-bridging-the-gap-between-the-european-union-and-africa |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{wamuyu2021taxing, author = {Wamuyu, Ruth}, title = {{Taxing the Digital Economy: Bridging the Gap between the European Union and Africa}}, institution = {Africa Policy Research Institute}, year = {2021}, month = nov, url = {https://afripoli.org/taxing-the-digital-economy-bridging-the-gap-between-the-european-union-and-africa}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }