Treasury Cabinet Secretary Ukur Yatani who has proposed to levy 1.5 per cent tax on the value of digital transactions.
The Kenya Revenue Authority (KRA) is targeting companies operating in the country with no physical presence but who are creating value and income.
Multinational companies on the digital platform have been more successful than local enterprises the government should seek to tax these. But in trying to do this, they may choke other smaller businesses.
The digital services tax model of setting the tax first and then fixing its unintended consequences later.
Just how large is the digital economy dividend? It seems we may get an answer after January 2021 when it is expected that Kenya will commence levying a value-added tax on digital marketplace suppliers.
This was confirmed in the budget speech read last Thursday by Treasury Cabinet Secretary Ukur Yatani who has proposed to levy 1.5 per cent tax on the value of digital transactions. This will not be straightforward and he acknowledged that some of the transactions increasingly being carried out on digital platforms are difficult to effectively tax, but the new levy would provide the framework for this.
The Kenya Revenue Authority (KRA) is targeting companies operating in the country with no physical presence but who are creating value and income. Some of the targeted services under the draft law include e-books, streamed television, software, streamed music, event tickets, online learning courses, transport hailing platforms, online website hosting, and cloud storage.
The taxman determines that some of the criteria that would make the services taxable here include if they are paid for through a Kenyan bank or a using Kenyan credit card, or via a local SIM card and are delivered to an IP address in the country. But will Netflix share a list of its Kenyan subscribers with KRA? It may not even have an accurate account as some Kenyans use overseas proxies to register.
In their Digital Economy report published in 2019, UNCTAD identified seven global “super-platform” companies – Alibaba, Apple, Amazon, Facebook, Google, Microsoft, and Tencent that account for two-thirds of the market value of the seventy largest digital platforms in the world. Naspers, the parent of Multichoice and DStv, is the only African company on that list, largely because it owns 31 per cent of Tencent that runs WeChat in China.
Companies like Google and Facebook have displaced newspapers and television in the advertising race and it is natural that […]