International tax reform should help Africa’s digital transformation, EU-African Union summit told

More than 60 leaders are in Brussels for the sixth European Union-African Union summit.  And with many subjects on the table, they will have a lot to discuss in just two days.

An estimated 25% of the African population has access to the internet. Digital transformation is a priority for several countries, including the Democratic Republic of Congo, where the lack of digital infrastructure is just one of many challenges.

Make multinationals pay their fair share

“The first problem is regulation,” says Désiré Cashmir Eberande Kolongele, DRC Minister for the digital economy. “We must absolutely regulate digital activities on the continent. That means having clear rules that specify access conditions. The second problem is a problem regarding content. We need to make sure that the applications that will be developed in the digital sector answer people’s needs."

In order to regulate and finance the digital transformation, the DRC was one of the 136 countries and jurisdictions that joined the international taxation reform, concluded at the OECD. This will make sure that tech giants and other multinationals pay their fair share.

“In Africa, you have so many wasteful tax incentives, which result from the pressure of multinational companies that said please give me an exemption otherwise I will go there,” says Pascal Saint-Amans, Director of the Centre for tax policy and administration at the OECD. “Most of these incentives are wasteful and because there will be a minimum tax at 15%, African countries will now have the opportunity to put an end to these incentives, and that means significant money.”

Young female entrepreneurs help drive transformation

According to several members of the European parliament, another instrument that can benefit Africa’s economy is trade.

“There is a lot of human capital, young people living there, female entrepreneurs... the strength of women in the African economy when it comes to innovation and technology,” says Samira Rafaela, Dutch Member of the European parliament in the RENEW group. “There are a lot of opportunities in the African continent and the EU should be the trading partner for the continent when it comes to fair and just trade.”

By combining tax, fair trade, and human capital, Africa’s economy can take a giant leap towards its digital future.