Abstract:
Digital marketing in general and social media and blogging businesses, in particular, are thriving
and becoming the major source of public revenue around the globe. But the digital world has
become one of the challenges of taxation and tax law administration. On the other hand, many
countries face less revenue, excessive public expenditure, and high financial constraints. In this
respect, Ethiopia is advocating and working to diversify the source of taxation to increase public
revenue. Hence, a clear, effective, and well-designed regulatory mechanism should be
implemented to succeed in the plan. According to Ethio-Telecom, there are more than 22 million
internet subscribers in Ethiopia. And this year, Ethio-Telecom has made a total profit of 47.7
billion birr, where 13 billion was from the internet and data. Accordingly, the study focused on
digital marketing, specifically social media and blog businesses, since the business sector has
grown fast and needs effective regulatory measures to enhance the country's revenue and diversify
the source of taxation. YouTube channels, blogs, and other digital platforms based in Ethiopia are
making millions and getting paid based on the number of views and visitors, but they have never
paid tax for the income they generated. Ethiopia's Income tax proclamation No. 979/2016
incorporated all taxable incomes to be governed under the ambit of the proclamation. Yet, it is
inadequate and needs to be redesigned to address the contemporary tax issues of digital
businesses. For the study's central question, the paper identified the status of the Ethiopian Income
Tax proclamation vis a vis social media and blog businesses by exploring legal documents, related
literature, international experiences, and conducting relevant interviews. Accordingly, the study
concludes that the proclamation is too remote to regulate social media and blogging businesses.
Like any other business activity, digital businesses are expected to be treated under Schedule C of
the proclamation. But this schedule was designed to regulate traditional business activities; thus,
it is inadequate to apply to a unique digital business type. On the other hand, Art. 63 of the
proclamation is incorporated to address all taxable incomes that are not governed by the existing
schedules or other provisions of the proclamation. However, it is still challenging to regulate
digital business activities under Art.63 because this provision applies a 15% flat-rate tax, which
basically defeats the fundamental principles of taxation. Therefore, the proclamation is inadequate
to govern and regulate digital businesses like Social media and Blog Businesses. Hence, Schedule
C of the proclamation shall be amended by examining other countries' experiences and
incorporating the principles of digital taxation or crafting sui generis law alternatively, where
amendment is impossible for different reasons. But a sui generis law shall include all sorts of
fundamental taxation principles and give due attention to lower tax rates since digital business is
new and growing in Ethiopia.