In recent years YouTube has been a godsend to Zimbabwean creators who had hitherto been denied opportunities on Zimbabwe’s partisan broadcasting house ZBC. Thanks to YouTube’s Adsense program these creators earn a living off the videos they upload onto YouTube. Although it’s not earth-shattering Adsense remains the easiest way for creators to monetise especially if they are not large enough to get promotional deals elsewhere. Now those earnings are in danger thanks to YouTube’s new tax rules.

The US government has now tasked YouTube with collecting tax revenue from YouTube creators living outside the United States. The is the same rationale that Mthuli Ncube and tax authorities in other countries have been harping about. They claim that companies like Facebook and Netflix are making money by selling services to their population so it’s only fair that Facebook and Netflix pay taxes on that revenue just like traditional business.

In fact, Mthuli Ncube has managed to convince Facebook and Netflix to charge Zimbabweans a 15% VAT tax whenever they buy services on these platforms. Thanks to this Zimbabweans now pay more for placing adverts on Facebook and when signing up for Netflix. These companies simply added this 15% tax on top.

Anyway back to YouTube. Zimbabweans earning revenue on YouTube have to submit their tax information onto the platform. If they fail to do so they will be charged a steep default tax of 24%. However if you do submit your tax information they will only be charged a tax of 30% on revenue generated from American viewers.

How YouTube’s new tax will affect Zimbabweans?

YouTube goes on to give an example:

Let us say you are a Zimbabwean YouTube creator who has earned US$100 on Youtube with $10 coming from viewers in America the following will happen:
- If you haven’t submitted any tax information you will be charged a tax of $24 and only get paid $76
- If you have submitted your information you will be charged a tax of 30% on the $10 i.e the YouTuber pays a tax of US$3 on the US$10 earned off American viewers. This is because Zimbabwe doesn’t have a tax treaty with the United States

When will the new rules come in force?

The new rules will start applying later this year according to YouTube. Expect the new tax rules to come into effect starting this June i.e June 2021 and YouTubers should make sure they have submitted their tax information by 24 May 2024.

The beginning of a complex new world

Tech companies transcend borders in ways that repudiate traditional tax codes which were meant to tax revenue created the old way. Nowadays things are not so simple thanks to the internet. You can have an Instagram US influencer earning money from a Chinese tech company without them ever leaving their home town. How would you tax such revenue?

Traditionally you would have two scenarios:

The Chinese would want to tax the influencer as the influencer is actually doing business in China with Chinese nationals
The United States would want to tax the influencer as the influencer is generating that revenue whilst actually traditionally located in the United States.

Currently, scenario 2 is the most dominant one but other countries like Zimbabwe, Australia and those in the EU bloc are not happy about this. They want to tax revenue generated from providing services to their populations just as they do with traditional revenue. The grave danger for digital businesses is that they are going to be faced with double taxation in the absence of tax treaties.

Not only that with more and more countries enforcing scenario one we are going to have a very complex tax code for digital services companies. They will also have to keep track of everyone they provide services to possibly in ways that go against the privacy push that we are seeing globally with people and governments not wanting to be tracked.