Challenges and Opportunities of Implementing Digital Economy Tax Policies in Zanzibar Compared to Other East African Nations

Abstract

This paper focuses on the proposed Digital Service Taxation and examines the challenges aimed at boosting income tax and value-added tax (VAT) compliance. It applies the qualitative method through documentary analysis and compares the approach to digital taxation in Zanzibar with initiatives undertaken by other East African countries. The analysis includes literature reviews and articles to gain insights into the regional tax landscape. The paper seeks to uncover the differences in tax rates and business registration thresholds among the countries' digital tax policies. It also extends the analysis to explore the potential economic impacts of the Digital Economy Taxation Act on Zanzibar, considering both the opportunities and complexities posed by its enforcement if it is adopted. The paper emphasizes the dominant nature of digital taxation in an era increasingly reliant on digital transactions and highlights the challenges associated with tax collection from non-resident digital service providers. This paper aims to provide a comprehensive understanding of the African digital taxation framework and suggests insights into establishing clear rules that ensure effective tax collection without hindering the growth of the flourishing digital economy.