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Kenya Tax Authorities turn heat on e-commerce for revenue collection
Global online firms generating cash in Kenya’s cyberspace will start paying taxes in the next six months if Parliament enacts the Finance Bill, 2020 into law. The proposed law has not defined the threshold of what constitutes the amount of tax payable under digital services but stipulates that payment made under the new tax shall be due at the time of the transfer for the service to the providers. Alex Owiti, ICT Policy Analyst joins CNBC Africa for more.
Wed, 10 Jun 2020 14:59:14 GMT
Disclaimer: The following content is generated automatically by a GPT AI and may not be accurate. To verify the details, please watch the video
AI Generated Summary
- Kenya is set to enforce taxation on global online firms operating in the country within the next six months, as per the Finance Bill, 2020.
- The lack of a defined threshold for digital service taxation poses challenges in implementing fair and transparent tax practices.
- Effective enforcement of digital taxation requires a comprehensive policy framework and international cooperation to mitigate issues like double taxation.
Kenya's tax authorities are turning up the heat on e-commerce platforms to ensure they pay their fair share of taxes. Global online firms operating in Kenya will be required to start paying taxes within the next six months if the Finance Bill, 2020 becomes law. The new law does not specify the threshold for taxation on digital services, but it mandates that payments must be made at the time of the service transfer to the provider. Alex Owiti, an ICT Policy Analyst in Kenya, sheds light on the implications of this move. The decision to tax e-commerce businesses comes as a response to the increasing trend of businesses moving online, particularly accelerated by the COVID-19 pandemic. With more people shopping for goods and services online, the tax authorities see an opportunity to tap into this digital economy for revenue. The initiative to tax digital services is not a new concept and has been a topic of discussion since 2018 at the Davos forum. Earlier this year, global leaders also deliberated on digital taxation. This move highlights the need to adapt taxation policies to the evolving digital landscape. While the potential revenue from taxing e-commerce platforms is significant, the key challenge lies in defining a comprehensive framework to encompass all players in the online business ecosystem. Tax compliance in the e-commerce sector is crucial, but it requires a robust framework and clear guidelines for both companies and consumers. Enforcing compliance among digital companies that operate remotely from Kenya poses a significant challenge. International coordination is essential to avoid issues such as double taxation and ensure fair and consistent taxation practices across borders. The implementation of digital taxation is complex, especially for businesses that operate at a loss. Determining tax obligations for companies, based on profits or turnover, requires careful consideration to prevent undue financial burden on digital entrepreneurs. The tax authorities' previous attempts to introduce digital taxation through the Finance Act, 2019 were unsuccessful, raising concerns about the feasibility of the current proposal. Monitoring online advertisements for taxation purposes may present a practical approach initially, but it requires cooperation from digital platforms like Google and Facebook to provide accurate data to the tax authorities. The success of the new taxation framework will heavily depend on the development of a policy framework that is inclusive and considers the unique challenges of the e-commerce sector. The growing prominence of e-commerce in Kenya presents both opportunities and challenges for young entrepreneurs. While taxation is necessary for revenue collection, excessive tax burdens could stifle innovation and economic growth. Balancing taxation measures to ensure sustainability and fairness in the digital economy is essential to foster a favorable environment for entrepreneurial ventures. As Kenya moves towards implementing digital taxation, collaboration between stakeholders will be crucial to address the complex nuances of taxing the digital marketplace and promote sustainable growth in the e-commerce sector.
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