In what seems to be the latest triumph for Finance Minister Mthuli Ncube’s attempt to collect tax from online big tech companies, it appears Spotify, which recently came to Zimbabwe, is already collect VAT. We recently learnt that upon paying your Spotify premium subscription you are sent a receipt that includes VAT.
Below is an example sent to Zimbabweans when they pay for the premium package.
I can only assume that this VAT is being collected on behalf of the Zimbabwean government. VAT is territorial so it wouldn’t make sense for them to collect VAT from Zimbabweans on behalf of another government. The government already collects VAT from payments made to Facebook and Netflix. Value Added Tax is collected on top of the sales price on behalf of ZIMRA by businesses which then remit it to the tax authorities.
Mthuli Ncube laughs last
We all scoffed and laughed at Mthuli Ncube when he expressed his desire to make online companies pay taxes on revenue collected from Zimbabwe. It seemed like a step too far, surely these companies would laugh him off, Zimbabwe isn’t a big market after all so that would mean less leverage for him to negotiate. Well, it seems he gets to laugh last.
He went about it the clever way. It appears online giants don’t mind collecting sales tax and VAT on behalf of governments, regional authorities and states. In fact, they already have measures in place to do this. Those in the EU for example are really used to this as they pay VAT on most services.
Businesses don’t mind paying VAT because it doesn’t exactly hurt their bottom line. They simply add it to their Sales Price and as already said most have automated systems that know how much tax is payable to which authority.
When it comes to Spotify, few Zimbabweans will mind paying VAT here. US$0.38 cents is nothing really, it will not even buy you a loaf of bread so why complain about it. At US$2.99 Spotify premium is still way cheaper than in South Africa where it goes for about US$4.00.
Personally, I was a bit worried that the price would go up once the government started collecting VAT from Spotify, if it’s true that the government is already collecting VAT even at current prices, then we have nothing to be worried about, Spotify Premium is still a bargain.