Just as physical goods are subject to taxation, digital goods go through the same. The chasm between the two has gradually converged throughout the events of history. Following the advent of large multibillion-dollar commercial companies—Amazon, eBay, Jumia, Konga—e-commerce has infuriated a revolution. Sales have shifted into the digital world. Much of these goods still very much carry the burdens of a sales tax and imposition of VATs on the actual price by the sellers.
The impression is that goods that have a definitive weight and feel against one’s touch should be taxed culled from an idea that stems from the past when digital goods were inexistent. Now, the debate on whether to tax digital goods has risen.
Digital goods are goods that cannot be touched, they are abstract entities that require an electronic system of delivery. In the age of ICT, which we all live in, intangible goods, products, and services are steadily finding a voice in the field of commerce. Commodities like games, applications, music, website packages, eBooks, photographs, designs, art, movies, software, and online courses or educational materials are somewhat untouchable products that can be delivered electronically, via downloads or emails.
It might be difficult to accept taxation of different goods, however, insofar as they provide a need for customers, countries have seen the importance of generating tax revenue from such practice, asides from taxation of physical goods. This goes to show that the world is evolving; a decade ago, the sale of digital goods—talk less of physical goods through an online platform—would have seemed impossible or otherwise absurd.
The taxation of digital goods varies across different regions and countries and even states. The rules presently applied are subject to change. The pre-existing dynamism is enough evidence to prove that change is indeed variable.
Since the importance of taxing digital goods has been discovered, different world governments all over are beginning to flow with the trend, they are beginning to look beyond a physical world, they now ponder on the possibilities of adapting to a digital realm marked with data, information, and their quick dissemination.
In the US, 28 states tax digital products, each of which possesses its iteration of rules and regulations that guide the process. This depends on how they view digital goods on the whole. Digital goods, in Alabama, are considered personal property that is equally tangible and therefore can be taxed as much as physical goods. On the other hand, in Colorado, if physical copies of a newspaper publication, or any other publication are absent they do not impose taxes on the sale of the digital copy. About 23 states in the US believe that since digital goods are abstract, they should not be taxed.
In European Union countries, VAT imposed on digital goods is not universal. Member states charge according to the tax levied by other member states. Plus, digital businesses that sell to European customers must collect and release the VAT proceeds to whichever country they sell in. Thus, the buck of digital taxation often rests on the country’s shoulders. VAT charges differ from 15% – 27% in EU countries.
In India, the Online Information Database Access and Retrieval Services (OIDARS) is the body in charge of managing the taxation of digital products. Here, 18% of GST is imposed on digital goods regardless of the price. For Japan, the tax rate on digital goods, which is termed consumption tax is 8% for both foreign and local businesses. South Africa, otherwise, levies a 14% VAT charge with no discernment between B2B and B2C sales.
As the world evolves, other countries have seen fit to walk through the pathway of digital taxation, highlighting it as a lucrative means of revenue generation, as well as the development of the digital industry. China is still looking to implement VAT charges, whereas Nigeria, Malaysia, Uganda, Paraguay, etc., have all implemented taxation with or without thresholds, recently.
Direct and indirect taxation of citizens increases the whole of a country’s revenue. The brunt of this is faced by, of course, the consumers moreover, as indirect taxes for VAT imposition. Hence, they face more bills on physical and digital goods.
Notwithstanding, the imposition of these taxes is used to fuel the monetary capacity of different countries. More taxes mean that they can develop the field of digital business; issue solutions to the challenges and shortcomings of the area.
In all of this, governments should provide livable conditions for all digital consumers and sellers. If they foreshadow the growth of the institution, then fairer, simpler, uncompromising, and uncontroversial laws will be put in place to assure its survival.
The debate on this novelty is inescapable, but providing a clear ground for it to operate on is paramount if, and only if we have sought to incline ourselves into the ICT age. There are a host of digital service/product providers such as Netflix, Memberpress, PayLoadz, and entrepreneurs looking to sell their art, photographs, services, books, movies, music, etc.
All that stands now is proceeding with the trend, knowing that globalization is on the brink of exploding into a full-blown entity of interconnectedness in business, art, media, technology, governance, and an assortment of other institutions.