Assessing Under-Taxation and Tax Equity for Multinational Digital Platforms in South Africa

Phathutshedzo Manenzhe
Authors registered in the RePEc Author Service: Grietjie Verhoef ()

No 408, ERSA Working Paper Series from Economic Research Southern Africa

Abstract: Multinational digital platforms can generate substantial revenue in market jurisdictions without a proportionate allocation of taxable profit. This paper provides a South Africa-specific estimate of identifiable multinational platform revenue in the digital advertising market and compares the amounts associated with alternative rules for allocating taxing rights. Using the IAB South Africa/PwC estimate of R17.72 billion for the total digital-advertising market and the reported category and platform shares, this paper constructs an identifiable multinational platform revenue base of R13.99 billion, comprising Google paid search and Meta paid social. This revenue base is used to compare the receipts generated by a turnover-based Digital Services Tax (DST) with a simplified Amount A-style allocation and a full-attribution benchmark based on the groups’ consolidated pre-tax margins. The Amount A-style comparator produces approximately R175 million, while DST rates of 2, 3 and 5 per cent produce gross receipts of approximately R280 million, R420 million and R700 million. A full-attribution benchmark produces R1.075 billion. Using the broader market-size estimate raises each result by approximately 48 per cent, demonstrating the sensitivity of the estimates to the revenue base. The central DST estimate represents approximately 0.024 per cent of gross tax revenue and 0.13 per cent of corporate income tax receipts in 2023/24. Incidence evidence suggests that part of the charge may be passed on to South African advertisers, while a unilateral measure would also create economic double taxation and trade risks. The paper recommends continued implementation of Pillar Two and support for the multilateral allocation reflected in Amount A. A DST should not be introduced at present but should remain a conditional fallback if Amount A remains unavailable and administrative evidence supports further consideration.

Keywords: digital services tax; Pillar One Amount A; market jurisdiction taxation; multinational digital platforms; competitive neutrality; South Africa (search for similar items in EconPapers)
JEL-codes: F23 H25 H26 H87 K24 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2026-10
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Published in ERSA Working Paper Series, October 2026, pages 46

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Persistent link: https://EconPapers.repec.org/RePEc:rza:ersawp:408

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