INVESTIGATING THE ISSUES SURROUNDING THE TAXATION OF DIGITAL AND E-COMMERCE ACTIVITIES IN CAMEROON

CHAPTER ONE INTRODUCTION 1.1 Background of the Study E-commerce involves the buying and selling of goods or services through computer networks, using systems specifically designed to facilitate the placement and receipt of orders. These commercial transactions require dedicated platforms to function effectively. As Jack Ma remarked in 2017, e-commerce is increasingly becoming the future of trade, driven by continuous advancements in technology. The technological components of e-commerce include computers, internet connectivity, and skilled professionals, all of which support digital transactions. Essentially, e-commerce encompasses electronic processes where goods, services, and information are bought, sold, exchanged, or transferred. These transactions occur among a variety of actors, including individuals, businesses, government institutions, and civil society organizations (Alyoubi, 2015). The devices used in facilitating these transactions range from desktop computers and tablets to mobile phones and other smart devices. In scholarly literature, five main features characterize e-commerce: information sharing, the application of digital technology, the execution of buy-sell interactions, monetary exchanges, and competitive dynamics (Sylvain, 2017). With globalization and the rapid spread of the internet, e-commerce has become increasingly integrated into daily life. It takes several forms, including Business-to-Business (B2B), Business-to-Consumer (B2C), Business-to-Government (B2G), Consumer-to-Business (C2B), and Consumer-to-Consumer (C2C) transactions (Sylvain, 2017). The explosive growth of e-commerce and digital transactions has significantly reshaped the global economic landscape. While it presents many new opportunities, it also introduces complex challenges, particularly for tax authorities. Traditional tax systems are struggling to keep pace with the complexities of the digital economy, often leading to gaps in tax policies and resulting in substantial revenue losses for governments (OECD, 2018). Cameroon is one of many countries facing the urgent task of revising its tax regulations to better capture and govern digital and e-commerce-related transactions within its borders. Located in Central Africa, Cameroon is gradually shifting toward a digital economy. This shift is propelled by increased internet penetration, the widespread use of mobile devices, and the proliferation of digital platforms. However, the country’s existing tax policies have not evolved fast enough to align with these digital developments. As a result, tax authorities in Cameroon face significant hurdles in effectively regulating and taxing digital activities. Currently, the Cameroonian tax system is structured mainly to target traditional, physical businesses. This framework does not adequately address the unique nature of digital goods and services. Many digital businesses in Cameroon exploit loopholes in existing tax legislation or relocate operations to jurisdictions with more favorable tax conditions, thereby facilitating tax evasion and leading to revenue losses (Fjeldstad & Moore, 2019). Moreover, Cameroon still faces challenges related to technological infrastructure—especially in rural or underserved regions—which hinders the implementation of efficient digital taxation systems. The limited adoption of modern tax administration technologies and insufficient technical capacity within tax authorities further complicate the situation (World Bank, 2020). Globally, the taxation of digital commerce is a topic of debate and ongoing negotiation. International organizations such as the OECD have emphasized the importance of global cooperation in formulating effective frameworks for taxing the digital economy (OECD, 2019). In light of these developments and challenges, there is growing recognition of the need to investigate the barriers that hinder the taxation of digital transactions and e-commerce in Cameroon. A thorough understanding of these challenges is critical to developing policies and regulations that promote equitable tax practices and support the growth of the digital economy. Therefore, this study aims to assess the specific challenges associated with taxing digital and e-commerce transactions in Cameroon. 1.2 Statement of the Problem Cameroon’s current tax policies may not adequately reflect the intricate nature of digital transactions and e-commerce, leading to inconsistencies and uncertainties in tax enforcement. The absence of a clear legal structure makes it difficult for tax authorities to efficiently identify, monitor, and tax online business activities (Alyoubi, 2015). The intangible nature of many digital goods and services, along with the international nature of e-commerce, presents unique challenges for tax compliance. The digital economy allows businesses to easily operate across national borders, often taking advantage of weaknesses or inconsistencies in national tax systems. This facilitates widespread tax evasion and avoidance, resulting in considerable financial losses for the Cameroonian government (Fjeldstad & Moore, 2019). In addition, many regions of Cameroon lack the technological infrastructure needed to effectively support digital taxation measures. The limited capacity of existing tax administration systems also makes it difficult to track and tax online transactions properly. Compounding this issue is a general lack of awareness among tax officials, businesses, and consumers regarding the tax implications of digital activities. Without adequate training and educational initiatives, these stakeholders often struggle to comply with tax regulations related to digital commerce, further exacerbating compliance issues and revenue shortfalls (Fjeldstad & Moore, 2019). Given the cross-border nature of digital trade, international coordination is essential for effective taxation. Cameroon may find it challenging to align its policies with international standards and agreements, potentially leading to disputes or cases of double taxation (Fjeldstad & Moore, 2019). Addressing these problems is essential not only to maximize the economic benefits of the digital economy but also to ensure fair taxation practices. This study therefore seeks to carry out a comprehensive evaluation of the challenges hampering the taxation of digital and e-commerce transactions in Cameroon and provide actionable insights for policy reform. 1.3 Objectives of the Study The main objective of this study is to evaluate the challenges associated with taxing digital transactions and e-commerce activities in Cameroon. The specific objectives are to: i. Examine current taxation practices concerning digital transactions and e-commerce in Cameroon. ii. Identify the key barriers that hinder effective taxation of digital and e-commerce activities in the country. iii. Analyze the available technological infrastructure used for tax administration and enforcement in Cameroon. 1.4 Research Questions This study will be guided by the following questions: i. What are the existing taxation practices for digital transactions and e-commerce activities in Cameroon? ii. What challenges obstruct the effective taxation of digital and e-commerce transactions in the country? iii. What technological infrastructure is in place to support tax administration and enforcement in Cameroon? 1.5 Significance of the Study This study holds significance for various stakeholders: Policymakers: By shedding light on the major obstacles to digital taxation, the study provides useful insights for crafting targeted policies and regulations that improve tax efficiency in the digital economy. Academic Community: This research contributes to the existing literature on digital taxation, particularly within the context of developing nations like Cameroon. It provides empirical data and critical analysis, serving as a valuable reference for researchers, academics, and policy analysts focused on the evolving landscape of digital taxation. 1.6 Scope of the Study The study is centered on exploring the role of taxation in supporting social programs in Nanga Eboko municipality, Cameroon. Specifically, the research will evaluate current taxation practices for digital transactions and e-commerce, identify the challenges hindering effective taxation in these areas, and assess the state of technological infrastructure used in tax administration within the region. 1.7 Limitations of the Study As with any research project, this study faced a few limitations. Financial constraints limited the researcher’s ability to access extensive literature and gather data through a broader sample size. Additionally, limited internet access, printing costs, and logistical challenges impacted the data collection process. Time was another constraint, as the researcher had to balance this study with other academic responsibilities, which affected the duration and depth of the research. 1.8 Definition of Terms Digital Transactions: These refer to the exchange of goods, services, or information via electronic means, typically involving electronic fund transfers or data exchanges through digital platforms or networks. E-commerce Activities: Encompass the full range of commercial operations carried out online, including the buying, selling, marketing, and distribution of goods and services using digital platforms. Taxation: The legal process through which governments collect financial contributions from individuals, companies, and other entities to fund public services and infrastructure. Tax Compliance: Refers to the obligation of taxpayers to adhere to existing tax laws by accurately reporting income, submitting required documentation, and paying taxes on time. Tax Evasion: The illegal practice of intentionally avoiding tax payments through deceitful means such as underreporting income or inflating deductions. Tax Avoidance: The legal strategy of structuring financial affairs in ways that reduce tax liability, staying within the bounds of the law while minimizing tax payments. Regulatory Framework: A system of rules, policies, and institutions set up by the government to monitor and manage specific sectors or industries. Digital Economy: A segment of the broader economy driven by digital technologies. It involves activities related to the creation, distribution, and consumption of digital goods and services, including IT, telecommunications, e-commerce, and online services. REFERENCES Alyoubi, A.A., (2015). 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