Now, for starters, this article won’t dive too much into an explanation of the Digital Services Withholding Tax, partially because outlets like Zim Price Check have already done a fantastic job at covering it in depth over the past week. It is however, a study of its effects, especially as said past week has already shown immediate ramifications of the tax and how it’s already affecting the everyday Zimbabwean. So, for a quick recap, this tax was introduced as a way for the Zimbabwean government to tax foreign tech or digital service companies (especially offshore ones) that have been gaining a stronger foothold in Zimbabwe as more of us keep using their services. This includes everyone from Microsoft to Netflix to Meta(Facebook, Instagram) and, at first, online stores like Amazon, SHEIN, and AliExpress. Even ride-hailing apps like InDrive are affected. Conceptually, this makes sense, after all, these companies are operating within Zimbabwe, even in a virtual capacity and thus they should be paying tax to the nation’s government to operate. All well and good. Except a lot of these countries already are charging VAT (Value Added Tax), which is the money that they should be sending back to said government. Anyone who’s ever bothered to check the payment details for their Netflix and even Starlink subscription will easily note how both those services note VAT on their generated invoices, which means that people were taxed already. Presumably, this money did make its way back to Zimbabwe, but it seems it wasn’t enough, and thus, on top of that VAT STILL being charged, the 15% tax will be applied to the local banks or payment platforms you use in order to make the payment.

Doesn’t make sense? You’re right to think so, because now it means that anyone paying for an online good that notes VAT is actually paying two taxes, which is insane once you start to add up the amounts, because it makes products move up a whole price bracket. Take Starlink for example. Anyone paying the $30 plan was already charged $4.70 in VAT, which was a 15.5% tax. Now with the added Digital Services Tax, there will be an additional $4.5 added. Making what was a $30.3 MSRP internet plan cost $39.5, almost $10 more! This may seem acceptable to some but to put it clearly, it’s a 30% increase in a bill all because someone wants to double dip into picking money out of your pocket. And yes, ideally the Digital Services Tax should remove this existing VAT tax, but clearly it isn’t, and now everyone, from people paying for Spotify to small businesses paying for Facebook ads have to factor that in their expenses.

Now, perhaps if all this was just an extra tax that adds to people’s spending or rampant consumerism, there would be a point to it. Even from a patriotic and economic perspective, wanting Zimbabweans to spend more money in the country (that eventually makes its way back to the government through taxation), would make sense. Except this new tax isn’t just affecting regular consumer behavior, it’s actively hindering multiple sectors of innovation and growth in the country, including one that the government itself is trying to promote.

We’ll start with a buzzword that even ministers have tried to latch onto: AI. We’ve had everyone from the Minister of ICT to multiple corporates talk about the potential impact and opportunities the field can bring to Zimbabwe. People were excited about the news of Strive Masiyiwa commissioning a data center being built here in Zimbabwe. And yet the government’s next move is making it harder for local AI developers and tech-savvy companies to even build anything AI-centric because it’s now 15-30% more expensive for them. For those who may not be aware, working with AI models requires incredible amounts of compute power and working with the best ones (especially those capable of, for example, making an AI bot that understands Shona and Ndebele), requires using state-of-the-art data centre’s that (newsflash!,) can’t be found in Zimbabwe, or from any other local provider. Everyone is using data centers from the likes of Microsoft, Amazon, and multiple smaller but still offshore players, meaning all of those costs are about to skyrocket for anyone in Zimbabwe who wants to build world-class products in the best way possible. Which is ironic considering these companies even try to cut down some pricing models for developing countries, and yet due to this new tax Zimbabwean AI tech workers will have to pay the same or more than say, they’re American counterparts, who already have much more disposable income GDP-wise, are working with comparable better environments in terms of internet infrastructure and other technical requirements, and can even have a geographical advantage as these AI tools are often built from scratch with certain demographics in mind at first. Multiple local Zimbabweans working in the AI industry have been doing work that’s outright meant to make AI better for locals, more attuned to our languages and culture, and now they have to pay a tax for daring to do that.