Ever been so bored that you took to contemplating the difference between a duty, a tax or a levy? You might also have pondered whether a tax is a duty that governments levy. Well, “therein lies the tale”, as they would say in William Shakespeare’s day – or, as Shakespeare had it said in Romeo and Juliet: “A rose by any other name would smell as sweet.”

The problem is that ‘duty’, ‘tax’ and ‘levy’ are used interchangeably, which should not be the case. Although, by definition, to levy is to impose a tax, a levy is not a tax in itself. If we stick to the singular reference as a tax, tax is not by itself difficult, it is simply just confusing. When contemplating tax, think of the Serenity Prayer: “Grant to us the serenity of mind to accept that which cannot be changed; courage to change that which can be changed, and wisdom to know the one from the other”. The existence of tax cannot be changed.

The only certainty about taxes is that there will be more. They might not be called taxes, but look out for ‘duty’, ‘levy’ or ‘charge’.

Speaking of levies, there is a new one being concocted in the European Union (EU) that, I have no doubt, will find its way to the shores on the southern tip Africa. On January 14, the European Commission (EC) published a roadmap that includes a public consultation for the introduction of a digital levy. This followed an EU leaders’ meeting on July 17 to 21 last year, where they requested the EC to propose a levy as a “resource” to support the EU’s borrowing and repayment capacity in the context of the bloc’s recovery package.

What the EC initiated is called ‘A fair and competitive digital economy – digital levy’. It aims to introduce a digital tax to ensure fair taxation of the digital economy. In short, it states that the EU needs a modern, stable regulatory and tax framework to respond to the developments and challenges of the digital economy. It goes on to state that, while we should promote and encourage digitalisation, as it can increase productivity and benefit consumers, digital companies should also contribute their fair share to society. Consultations opened on January 18 and closed on April 12.

The EC pointed out: “Tax systems have been lagging behind global technological developments over the past number of years. This has resulted in digital companies paying much less tax than they should. The Covid-19 crisis has also exacerbated this situation, as it has accelerated the transition towards a more digital world and boosted profits and revenues for many online companies. The digital levy would help to ensure that EU rules are fit for purpose in the digital economy, and that companies, whether digital or not, compete in Europe on fair terms and, in doing so, contribute to the recovery.”

Let us pause and be reminded of the Organisation for Economic Cooperation and Development’s inclusive framework, the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS), which brings together over 125 countries and jurisdictions to collaborate on the implementation of the BEPS package.

The OECD highlights that “BEPS refers to tax planning strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low- or no-tax locations where there is little or no economic activity. This undermines the fairness and integrity of tax systems because businesses that operate across borders can use BEPS to gain a competitive advantage over enterprises that operate at a domestic level”.

Before South Africa considers a digital tax, it should take into account the International Chamber of Commerce’s concern that “exploring proposals for an EU digital levy in parallel to ongoing work within the OECD inclusive framework could undermine existing efforts to reach global agreement”.