Kenya to double Big Tech tax
Economy
Kenya to double Big Tech tax
Tuesday, April 12, 2022
Summary
- Kenya plans to double taxes on foreign tech giants like Amazon, Netflix, Twitter and PayPal that use the internet to market and sell products.
- The Treasury has proposed to increase the Digital Tax Service (DST) to 3% of the gross value of online transactions in the financial year starting in July, from 1.5% currently, until the finance bill 2022.
Kenya plans to double the tax on foreign tech giants like Amazon, Netflix, Twitter and PayPal that use the internet to market and sell products, a signal that Nairobi is toughening its stance against the US-backed global minimum rate on multinationals.
The Treasury has proposed to increase the Digital Tax Service (DST) to 3% of the gross value of online transactions in the financial year starting in July, from 1.5% currently, until the finance bill 2022.
The Kenya Revenue Authority (KRA) has identified foreign businesses, which derive revenue in Kenya through digital marketplaces – selling exclusively online or providing platforms for such transactions – as a major driver of tax revenue in a highly digitized global economy.
“The Third Schedule to the Income Tax Act is amended…by deleting the phrase “one point five percent” appearing in paragraph 12 (Digital Services Tax Rate) and replacing it with the expression ‘three percent,'” Treasury Cabinet Secretary Ukur Yatani said. written in the 2022 finance bill.
Under the current 1.5% levy, the KRA had targeted 13.9 billion shillings over three years to the end of June 2024, forecasting gross revenue generated by foreign businesses in Kenya’s digital market at about 926 billion shillings.
The Digital Services Tax (DST) collection forecast includes 3.4 billion shillings for this financial year ending in June, 5.0 billion shillings for the next financial year and 5.5 billion shillings for the one ending in June. ends in June 2024.
The tax is levied on the sale of e-books, movies, music, games and other digital content and applies to foreign businesses.
“Treasury is trying to make sure they get a fair share of the pie because half the business has gone online during Covid so the plan is to increase DST to capture that business which went online,” Philip Muema, a partner at Tax and business consultancy Andersen Kenya, said over the phone.
Kenya – alongside Nigeria, Pakistan and Sri Lanka – has withheld its vote on the United States’ global minimum corporate tax at the rate of 15% under the Organization for Economic Co-operation and Development (OECD) based in Paris.
Kenya’s reluctance to sign the OECD deal is based on the fact that the pact contains clauses that will require it to drop the digital services tax, which it first introduced in January 2021.
The KRA initially targeted a share of revenue earned by resident and non-resident businesses that sell products over the internet, but amended in the 2021 Finance Law to apply to non-resident businesses as of July 1, 2021.
“Members who adhere to the statement are obligated to withdraw their unilateral measures such as the Digital Services Tax and similar measures imposed on non-resident businesses that do not have a physical presence in the market jurisdiction,” Terra said. Saidimu, KRA Commissioner for Intelligence and Strategic Operations. , said last October.