Bankers and economists have hailed the Treasury’s clarification that the Digital Services Withholding Tax (DSWT) will not apply where Value Added Tax (VAT) is already being remitted, noting that this demonstrates policy responsiveness
Further, the banking sector and economic experts said the intervention would strengthen Government revenue inflows by reducing tax avoidance and evasion.
The imported services include digital streaming and online content, e-hailing, and platform-based fees, online advertising and satellite-based and other cross-border digital access offerings.
Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube yesterday cleared confusion over the scope and administration of the DSWT when he explained that taxpayers already accounting for and remitting VAT on imported digital services in line with the VAT Act will not be subject to the DSWT on the same transactions, stressing the measure is not intended to result in double taxation.
“Taxpayers who are already accounting for and remitting VAT on imported services in accordance with the VAT Act will not be liable to the DSWT on the same transactions. The measure is not intended to result in double taxation,” the minister clarified in a statement.
The ministry has also moved to correct messaging from local banks suggesting the tax applies to all international card transactions, noting that such interpretations are inconsistent with policy intent.
Economist Tinevimbo Shava said the clarification was critical in restoring confidence among businesses and consumers who had feared overlapping taxes on the same transactions.
“Double taxation distorts behaviour. When firms or individuals feel they are being taxed twice for the same activity, they naturally look for ways around the system,” Mr Shava said. “Through making it clear that VAT-compliant taxpayers are exempt from the DSWT on those transactions, the Government is closing loopholes while encouraging voluntary compliance.”
Mr Shava added that clear tax rules tend to widen the tax base over time. “When compliance becomes simpler and more predictable, more economic activity stays within the formal system. That ultimately boosts revenue without increasing rates,” he said.
