Megatrends are large, transformative global forces that impact everyone. The EY Africa Tax Conference addressed the impact of Megatrends on tax in the future.
"What we want to try and do is to analyse these megatrends and say ‘how will they likely change tax?’," said Mark Goulding, Tax Director at EY.
One of the megatrends is around technology where a 3D printer prints an iPhone case.
“We start with absolutely nothing in the printer, we end up with a good in our hands that we will be able to use - it crossed no borders, it has paid no customs, it has paid no VAT,” said Goulding.
This is because the information used to print the case is downloaded off the internet, so as Goulding explains, revenue services struggle to tax such transactions. Their demonstration is to show the tax problems that arise from problems from technological advancements.
"Another one of the big technology trends is a move to the use of mobile phones and the radical increase in the amount of commerce that is actually happening on a phone,”
Goulding supplies the example of a South African who travels through New York, orders a book online for delivery, at a London hotel, but only reads the book a week later in Spain.
“So you have multiple jurisdictions, a person resident of South Africa in the US when the ordering happens, delivered to another geographical jurisdiction and consumed technically in a third and each one of those could have different tax triggers attached to them
He adds: “None of them are harmonised at the moment and aligned and that creates great tax complexity as where that transaction would be taxed and what taxes would apply to it?"
Goulding says he was most interested in a United Nations statistic that said 60 per cent of the university graduates of the year 2030, will come out of the emerging markets which will allow for those regions to benefit from a tax perspective.
“That could be really exciting for the emerging market and again research and development, intellectual property has significant tax consequences attached to it,” said Goulding.
Right now taxing rights go to the intellectual property (with regards to the 3D printer product) so Goulding figures if that intellectual property moved to the emerging markets it would allow the developing world to gain the taxing rights.
“We could get the research and development into the emerging markets but if we don’t move the research and development, we may see these graduates actually moving away from the developing world,” he said.
Such would be a loss of taxes on their earnings and the loss of intellectual property of their potential new inventions, which would be another consequence of such a brain drain.