The Kenyan government has commenced the implementation of the Digital Service Tax for internet businesses, that it first proposed in 2020.
Through the new Digital Tax, it is hoping to raise up to 45 million dollars (around 4.99 billion Kenyan Shillings) in revenue before July of this year; 2021.
The Digital Service Tax policy was first drafted by the Kenya Revenue Authority (KRA) in 2020. It proposed the taxing of online goods sold with the East African nation of Kenya.
The taxable online goods include taxi hailing platforms and services, podcasts, music, movies, cloud storage, numerous other e-commerce product products and services, and mobile applications.
With the Digital Services Tax individuals as well as businesses will be made to pay a 1.5 percent tax on the value of products and services sold or offered online. Businesses and individuals will also pay a levy VAT of 14 percent on a number of goods.
As a result of the advancements brought on by modern day technology, a large number of businesses have begun to carry out transactions online or digitally. According to the Kenyan government, it has become difficult to effectively tax income earned from online platforms due to the nature of these transactions. Hence the beliefs that the Digital Services Tax will provide a structure that will make it possible to effectively tax online businesses.
Kenya is however not the first African country to carry out digital taxation. South Africa be some the very first country on the African continent to implement the taxation of e-services in 2014. Its strategy was to simply ensure that all companies within the company registered as soon as the earned up to 50,000 South African Rands which was 3,500 dollars at the time.
Uganda also introduced a Digital Service Tax in 2018 where all internet users (including users of social media platforms), were made to pay a daily duty tax of 200 Ugandan Shillings ($0.05).
The Ugandan government stated that the daily duty tax was implemented as a way to reduce gossip on social media while also expanding the nation’s tax base.
Tanzania introduced an Online Content Regulation policy as well in 2018 with the Tanzanian government making it known that, “a telecommunication service operator providing data used for accessing over the top services is liable to account and pay excise duty on the access to over the top services.”
The Tanzanian government implemented the policy as a means to discourage the spread of fake news from television services, online radio services, bloggers and to discourage the spread of hate speech.
The regulation in Tanzania stated that Over The Top (OTT) services which include Twitter, Facebook and WhatsApp, will be subject to a tax duty per each user and per each day of access, and stated that bloggers will pay a yearly fee of 900 dollars.
Everyone who publishes content online must apply for a license fee which costs 43 dollars (100,000 Tanzanian Shillings). Said online content publishers must pay an initial license fee of 429 dollars (1 million Tanzanian Shillings) and an annual license fee of 429 dollars (1 million Tanzanian Shillings), as well.
Although the ongoing Coronavirus pandemic has aided the growth of very many online establishments and businesses and led to many others using the digital space a lot more to generate income, the taxes just might adversely affect business and put a strain on the pockets of end users.
In Uganda for example, over 60 digital platforms were affected by tax. These platforms included Twitter, WhatsApp and of course Facebook. As a result, Uganda lost almost 30 percent of its internet users between March 2018 to September 2018 when the Ugandan government implemented the tax.
In the period of 2018 to 2019 the tax collected reduced by 234 billion Ugandan Shillings due to the fact that all over Uganda, stopped paying. The payments stopped because internet users began to use WiFi connections in their workplaces, as a means to avoid the over the top tax payments.
On the other hand, measures like the Digital Service Tax just might prove to be what is needed to effectively handle today’s challenges and essentially get rid of all public debts incurred overtime.
The Kenya Revenue Authority (KRA) has stated that it expects the number of registrations to reach 1,000 by June 2021, leading to the possible generation of revenues of up to 45 million dollars (4.99 billion Kenyan Shillings).
Kenya has in the past had debt problems and according to Tech Cabal, subsequently hired a team of debt management experts to help handle the country’s rising debt that resulted in significant liquidity pressures on the Kenyan economy.
Loans from the People’s Republic of China currently make up 72 percent of Kenya’s bilateral debt, and 21 percent of Kenya’s foreign debt.
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