Kenya’s taxman, the Kenya Revenue Authority (KRA) has created a unit to track revenues generated from every digital transaction in the country. This is in line with plans to shore up revenues from it’s declining economy. According to the KRA, this unit will track revenues generated by digital companies that do not have a physical presence in Kenya. Revenues from online businesses and the entire digital marketplace in the country will also be tracked.
“To ensure that the digital market sector pays their fair share of taxes, KRA has set up a dedicated unit to facilitate the taxpayers in this sector in the determination and accounting for taxes,” deputy commissioner in charge of policy and domestic taxes Caxton Masudi told the Business Daily last week.
Caxton Masudi, KRA’s deputy commissioner in charge of policy and domestic taxes said the agency intends to use transaction tracers through data-driven detection in taxing multinationals as we roll out taxes on digital businesses.”
Though how these transaction tracers will work is not clear, we earlier stated that the KRA plans to partner with the Communications Authority of Kenya. The partnership would likely see telcos and Internet Service Providers (ISPs) give information on the online activities of Kenyans. Also, the KRA will regard any transaction made through a Kenyan Bank, credit card or SIM card, for a service delivered to an IP address in Kenya as taxable.
Recall that Kenya, on the strength of its Finance Act, had already earmarked a 1.5% tax on digital companies in the country and a 14% VAT on all online transactions. Consequently, it means that the KRA will be tracking the locally generated revenue from the likes of Google, Facebook, Netflix and several others. It appears the country is pushing on with the plan despite the risk of a trade war with the USA.
Regular players in Kenya’s online space will also not escape the gaze of the KRA. Besides companies, customers making transactions from any website in or outside Kenya will also be charged VAT. The KRA, states that the unit will also help taxpayers in the sector determine and account for taxes. In Africa, Kenya seems to be spearheading plans to tax the digital economy. A space that has been a large puzzle for the entire globe.
Another African economic giant, Nigeria, also has provisions for taxing digital companies in its Finance Act 2020, but with no publicly stated plans on how to enforce it. It is highly likely that Nigeria will be watching developments in East Africa with interest. Though Kenya claims it wants to shore up dwindling revenues by implementing digital taxes, it is still not clear how effective this will be. Based on our previous discussion, the East African powerhouse might either pull-off a massive win, or end up hurting its citizens.