EconomyFact Check

Communications Minister, Ursula Owusu-Ekuful falsely claims that UK’s Digital Services Tax is about 10%

Claim: Ghana’s Communications and Digitalization Minister, Ursula Owusu-Ekufu, has asserted that the United Kingdom’s Digital Tax rate is about 10%.

The claim is false. The UK government introduced a 2 percent Digital Service Tax in 2020 but agreed to end it in October 2021.

Full Text

The government of Ghana intends to introduce an electronic transaction levy (e-levy) in an attempt to widen the tax net and rope in the informal sector.

The move has, however, been met with stiff opposition by some sections of the Ghanaian public.

The Minority in Parliament has described the proposed tax as regressive and one that will bring “unbearable hardship on Ghanaians.”

On Thursday, January 27, 2022, the Ministry of Information organized a town hall meeting to educate the public about the tax and urge them to accept its implementation.

Addressing the meeting which was held in Koforidua, the Minister for Communication and Digitalization, Ursula Owusu-Ekuful said that the government’s e-levy rate of 1.75% was relatively low.

According to her, in other jurisdictions, particularly the United Kingdom, their tax rate for Digital Services was about 10%. 

“E-levy is being introduced at the lowest rate for any tax in Ghana, comparatively at 1.75%, less than 2%. In other countries, digital taxes are being introduced at the rate of up to 10% and they’re paying. That’s the UK. And we go there and seek loans from them to finance our development. When we are not paying the requisite taxes that we should,” Ursula Owusu stated.

The town hall meeting was streamed live on Facebook and the claim can be found between minutes 28:30 to 29:10.

Her claim has been featured in a news publication on www.myjoyonline.com

Verification

The UK government, in its 2018 budget announced the introduction of a Digital Service Tax (DST).

It was a 2% tax on the revenues of search engines, social media services and online marketplaces which derive value from UK users.

The tax was to take effect in April 2020.

The tax was a response to concerns that multinational tech giants making money in the country were shifting their profits overseas where they could be taxed at lower rates.

Full details of the tax can be found on the UK government’s website.

Screenshot of page 44 of UK’s 2018 budget.

Subsequently, tech giant, Google, notified advertisers of additional charges following the introduction of the tax.

A January 2021 report by the United States Trade Representative, Robert Lighthizer, raised concerns about the UK’s Digital Service Tax.

In the report, it was asserted that the three categories of services targeted by the tax were areas where US companies were market leaders.

“The UK DST targets three categories of services where U.S. companies are market leaders: internet search engines, social media services and online marketplaces. It appears unlikely that the DST will cover certain digital services where similar UK or European firms are successful,” page 15 of the report reads.

Following a deal agreed by 136 countries to the effect that large and profitable multinational companies pay a “fair share” of tax in the markets where they do business, the UK announced plans to end the DST.

“We have agreed a way forward on how we transition from our Digital Services Tax to the newly agreed global tax system. This agreement means that our Digital Services Tax is protected as we move to 2023, so its revenue can continue to fund vital public services,” Reuters quotes the UK finance minister, Rishi Sunak, as saying in a statement.

Other European countries with digital taxes

There are 15 European OECD countries that have either planned or implemented taxes on digital services. However, they differ in their structure. The tax rates range from 1.5 percent in Poland to 7.5 percent in both Hungary and Turkey (although Hungary’s tax rate has been reduced temporarily to 0 percent).

Other countries across the world with digital tax rules have been published on Quaderno

Conclusion

It is not true that the Digital Service Tax (DST) in the UK is at the rate of about 10% as claimed by the Communications Minister, Ursula Owusu-Ekuful. UK’s DST was introduced at 2% and was targeted at large companies and not individuals as in the case of Ghana. Moreover, the UK has agreed to end the DST.

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