The Advent of Online Business in Tanzania: The Riddle of Permanent Establishment and Tax Avoidance

Abstract

The astonishing growth of the internet has given rise to the concept and practice of electronic commerce (online business), which has transformed how business is conducted on the planet today. Regardless, it has caused issues with tax assessment in the digital economy. Despite the critical role that the digital economy has played in altering how businesses are conducted, it has been criticized for encouraging tax evasion and loss. Tanzania's current tax law regards corporate residence presence as a Permanent Establishment (PE) as the nexus determining requirement for tax imposition. Even though the notion has mainly succeeded in the past, the rise of the digital economy has produced several obstacles and issues about whether the concept must be reconsidered regarding digital economy taxation. This is owing to the advent of new difficulties, such as traditional corporations bearing a more significant tax burden than digital enterprises, which face tax rates near zero in countries with a significant market share.

Keywords: Permanent Establishment (PE), digital economy, Tax avoidance in Tanzania

DOI: 10.7176/JLPG/150-03

Publication date: January 28^th 2026