Recent attempts by African governments to increase tax revenue have targeted e-commerce, the most promising and innovative sector in most of their economies. But, as innovators fight these new levies, it is important to look at both sides of the argument. So, do African countries need more taxes or a new strategy?

The Case for More Tax Revenue

Governments are making the case for recovering taxes that have been left behind, particularly in the informal sector, where proper follow-up is lacking. They also insist that SMEs that trade online pay their fair share, especially since some of these mega e-commerce platforms do not pay taxes in the countries where they operate. Oxfam reported in 2015 that multinational corporations cheated Africa out of $11 billion in taxes in 2010.

The Opportunities for Small Businesses

In reality, the majority of SMEs in Africa are sole proprietorships operating on a very low budget, grateful for the opportunity to trade in markets that would have been inaccessible 20 years ago. They take advantage of free social media promotion and micro advertising budgets to reach a global audience. VAT on their promotions can reduce their advertising budgets, boosting overall profit.

E-commerce has opened up new opportunities for millions of people in developing countries, such as teaching, transcription, export, consulting, entertainment, and, most importantly, the exchange of information and knowledge. According to the Brookings Institute, Africa's Internet economy could reach $180 billion by 2025, with a $15 billion opportunity for women.

While the taxman contemplates where he will wield his axe next, African governments must plan on being more efficient. First, corruption must be eliminated in sectors that are currently legitimately taxed. That is the most certain way to increase revenue. Second, governments are not properly educating their citizens about the tax breaks included in some of the trade deals from which they should benefit, such as AGOA and others. This knowledge can help small businesses choose countries with low or no tariffs and make more profit, increasing their likelihood of being able to afford certain items or pay taxes at home.

Even more important than all of this is trust. Entrepreneurs need to see how tax benefits are used to build roads, bridges, provide water and electricity, and offer the right infrastructure to power businesses.

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More taxes won't solve anything, even if you combine the world GNP and give it to most African leaders especially Nigerian leaders, they will still not achieve anything. Nigeria doesn't have functional refineries, but what the country spends on subsidies is more than enough to build refineries. The problem isn't the revenues, it is just lack of sensible leaders in Africa.