International companies that supplied content to South Africa via online streaming or subscription services should pay their fair share of tax, PwC said on Tuesday.
Such multinational companies did not have to comply with the same tax rules as their local counterparts, and in some instances were not taxed, head of indirect tax for PwC Africa Charles de Wet said in a statement.
“We are living in an era of unprecedented digital change. South Africa’s tax laws are outdated and have not kept pace with the growth of the digital economy,” he said.
“Digital giants should be held accountable and pay their fair share of South African taxes.”
The content streaming market had grown, with many service providers such as Netflix, DStv BoxOffice, and HBO Go, as well as online magazines, news and newspaper providers, becoming well known brands in South African households.
“Their popularity with internet users continues to spike, notwithstanding that many foreign content providers may not officially supply services to South Africa,” De Wet said.
“Despite this, South Africans are accessing these services by means of ‘location masking’ virtual private networks (VPN).”
Foreign content providers benefited from the “tax-free” nature of the services they supplied to South Africa. However, local suppliers were feeling the economic pinch as they were requited to pay both value-added tax (VAT) and corporate income tax, 28% of profits generated.
“This further increases the gap between domestic and foreign players in the online media industry and has a negative impact on revenues collected to finance necessary public services for South African residents,” said De Wet.
“This aside, technology companies have always stepped on one another’s toes to try to become the peoples’ gateway to the digital world – to be the only place people need to go to get what they want.”
The digital economy was rapidly becoming the economy itself, and South Africa needed to make sustainable provisions for these changes.