AN ASSESSMENT INTO  THE CHALLENGES OF TAXING  DIGITAL TRANSACTIONS AND E-COMMERCE ACTIVITIES IN CAMEROON

CHAPTER ONE

INTRODUCTION

Background of the Study

Commerce refers to electronic transactions involving the purchase, sale, transfer, or exchange of products, services, and/or information. These transactions can occur between various actors, such as individuals, businesses, governments, and civil society organisations (Alyoubi, 2015). Transactions may be conducted using desktop computers, mobile devices, tablets, and smartphones. In literature, e-commerce is defined by five key features: information sharing, utilization of technology, buy-sell transactions, monetary transactions, and rivalry (Sylvain, 2017). Due to globalization and the advancement of the internet, e-commerce has become more prevalent in our everyday lives. The many categories of e-commerce include Business to Business (B2B) transactions, Business to Consumers (B2C) transactions, Business to Government (B2G) transactions, Consumers to Business (C2B) transactions, and Consumers to Consumers (C2C) transactions (Sylvain, 2017). The rise and rapid expansion of digital transactions and e-commerce have fundamentally transformed the global economic terrain, offering fresh prospects and obstacles for governments throughout the globe. As trade becomes more digitalized, conventional tax systems are finding it difficult to adjust to the intricacies of the digital economy. This has resulted in gaps in taxing structures and financial losses for governments (OECD, 2018). Consequently, the e-commerce regime presents more complex problems than the more conventional, face-to-face methods of doing business. The onus is on tax authorities to protect their income stream without stifling innovation in technology or the ability of businesses to adapt to a dynamic and growing market. Because of the fast growth of digital rms via online sales, a debate over the right taxation regime has sprung up. There are already problems with applying the conventional consumption tax regulations to each of these sectors due to the expansion of digital businesses' e-commerce, and the possibility of various implementing laws in different nations only makes things worse. The digital economy is characterised by a lack of physical presence, a heavy reliance on intangible assets, complex transactions, and the difficulty of deniing assets, activities, and types of income. As a result, governments and suppliers face increased compliance costs and the risk of digital enterprises being double- or non-taxed unintentionally due to inconsistent laws.  Considering these difficulties and advancements, there is an increasing acknowledgment of the need of evaluating the barriers impeding the taxation of digital transactions and e-commerce operations in Cameroon. To establish successful policy interventions and regulatory measures that promote fair and equitable taxation practices and stimulate the expansion of the digital economy, it is crucial to have a thorough grasp of these difficulties. Therefore, the researcher sought to assess the challenges of taxing  digital transactions and e-commerce activities in Cameroon.

1.2 Statement of the Problem

The existing tax rules and regulations in Cameroon may not sufficiently account for the complexities of digital transactions and e-commerce, resulting in uncertainty and discrepancies in taxing procedures. In the absence of a well-defined legal framework, tax authorities may have difficulties in accurately identifying, monitoring, and taxing digital transactions and e-commerce operations (Alyoubi, 2015). The intangible character of digital products and services, together with the cross-border nature of e-commerce, creates difficulties in ensuring tax compliance. The digital economy facilitates widespread tax evasion and avoidance, since firms may effortlessly conduct operations across international boundaries and take advantage of loopholes in tax legislation. Consequently, this leads to significant financial losses for the Cameroonian government (Fjeldstad & Moore, 2019). The lack of technology and digital infrastructure in some parts of Cameroon may impede the successful adoption of digital taxation methods. Limited technical capabilities in tax administration systems might hinder proper tracking and taxation of digital transactions. Furthermore, tax authorities, firms, and consumers are not sufficiently informed or equipped to understand the tax consequences of digital transactions and e-commerce operations. In the absence of sufficient education and training programmes, stakeholders may have difficulties in understanding and dealing with the intricacies of digital taxes, which may result in problems with compliance and loss of income (Fjeldstad & Moore, 2019). Therefore, international collaboration and coordination are necessary for effectively taxing digital transactions and e-commerce operations due to the global character of the digital economy. Cameroon may have difficulties in harmonizing its tax policies with global norms and accords, which might result in disputes and complications related to double taxation (Fjeldstad & Moore, 2019). It is crucial that government tackle these difficulties in order to take advantage of the economic advantages of the digital economy while guaranteeing fair and equal taxation policies. Due, to these problems, the study assess the challenges of taxing  digital transactions and e-commerce activities in Cameroon.

1.3 Objectives of the Study

The broad objective of the study is to assess the challenges of taxing digital transactions and e-commerce activities in Cameroon. The specific objectives is as follows

Evaluate the level of tax compliance among digital business owners in Cameroon.

Investigate the impact of digital taxation on the growth of the digital economy in Cameroon.

Assess the effectiveness of the current tax collection mechanisms for digital transactions and e-commerce activities in Cameroon.

Analyze the challenges faced by tax authorities in effectively taxing digital transactions and e-commerce activities in Cameroon.

1.4 Research Questions

The following questions have been prepared for the following

What is the level of tax compliance among digital business owners in Cameroon?

What is the impact of digital taxation on the growth of the digital economy in Cameroon?

How effective is the current tax collection mechanisms for digital transactions and e-commerce activities in Cameroon?

What are the challenges faced by tax authorities in effectively taxing digital transactions and e-commerce activities in Cameroon?

1.5 Significance of the Study

The findings of the study will be significant to the following

Policymakers: The study offers significant insights for Cameroon's policymakers by identifying and analysing the hurdles that limit the taxation of digital transactions. With this new knowledge,  more precise legislative interventions and regulatory steps to boost the efficiency of digital economy taxation policies can be taken.

Academia:  the study will be beneficial to  the academic community the study as it will contributes new knowledge to the academic community. It will fill the gaps in existing literature and expands the understanding of digital taxation in the context of developing economies. In addition, the study will open avenues for further research and inquiry into digital taxation

1.6 Scope of the Study

The study focuses on the role of taxation in funding social programs  in Nanga Eboko municipality, Cameroon. Empirically, the study will evaluate the level of tax compliance among digital business owners in Cameroon, investigate the impact of digital taxation on the growth of the digital economy in Cameroon, assess the effectiveness of the current tax collection mechanisms for digital transactions and e-commerce activities in Cameroon and analyze the challenges faced by tax authorities in effectively taxing digital transactions and e-commerce activities in Cameroon..

1.7 Limitations of the study

Like in every human endeavour, the researchers encountered slight constraints while carrying out the study. Insufficient funds tend to impede the efficiency of the researcher in sourcing for the relevant materials, literature, or information and in the process of data collection (internet, questionnaire, and interview), which is why the researcher resorted to a moderate choice of sample size. More so, the researcher will simultaneously engage in this study with other academic work. As a result, the amount of time spent on research will be reduced.

1.8Definition of terms

Digital Transactions: Digital transactions refer to the exchange of goods, services, or information conducted electronically over digital platforms or networks. These transactions typically involve the transfer of funds or data between parties using electronic devices such as computers, smartphones, or other digital devices.

E-commerce Activities: E-commerce activities encompass the buying, selling, marketing, and distribution of goods or services over the internet or electronic networks. This includes online retailing, digital marketplaces, electronic payments, and other commercial activities conducted through digital platforms.

Taxation: Taxation is the process by which governments impose charges on individuals, businesses, or other entities to fund public expenditures and services. 

Tax Compliance: Tax compliance refers to the adherence of taxpayers to tax laws, regulations, and reporting requirements set forth by the government. It involves accurately and timely fulfilling tax obligations, such as filing tax returns, reporting income, and paying taxes owed, to avoid penalties or legal consequences.

Tax Evasion: Tax evasion occurs when individuals or businesses intentionally evade or underreport their tax liabilities by concealing income, overstating deductions, or engaging in other fraudulent activities to reduce their tax burden. Tax evasion is illegal and punishable by law.

Tax Avoidance: Tax avoidance involves the legal manipulation of financial transactions or arrangements to minimize tax liabilities within the bounds of existing tax laws and regulations. 

Regulatory Framework: A regulatory framework comprises laws, policies, guidelines, and institutions established by the government to regulate and oversee specific industries, sectors, or activities. 

Digital Economy: The digital economy refers to economic activities facilitated by digital technologies, including the production, distribution, and consumption of digital goods and services. It encompasses sectors such as information technology, telecommunications, e-commerce, digital media, and online services.