By Mercy King’ori and Jaaziyah Satar
The idea of taxing the digital space is now not novel. Many countries in the world have toyed with the idea as a means of increasing their tax base revenue. In fact, others have already implemented these taxes despite initial resistance. Two such countries are Uganda in Africa through imposing social media tax and France in Europe through taxing Over-the-Top platforms. Kenya has also not been left behind in exploring this sphere as a tax generating avenue; from issuing public notices to online businesses to file tax returns to developing corporate plans to discuss how to utilise the digital economy as a means of increasing its tax base.
The tax man is out to have a share of the revenue from this sector. In Kenya Revenue Authority’s seventh corporate plan, 2018/2019- 2020/2021, plans of taxing the digital economy featured heavily as a new channel of revenue to hit its 6.1 trillion Kenya shillings tax base by 2021. The icing on the cake was on 7th November 2019 when the Finance Bill that was tabled after delivery of the 2019/2020 budget was assented into law. The Act has introduced elements of taxing the online marketplace (OM). Prior to the amendment, there was disquiet among the interested parties on the implementation of the taxes. This is because the taxes have the potential of affecting the very core of the operation of an affected e-commerce business. Indeed that has been of concern world over due to the complexities in the OM. For example, most OMs can be accessed anywhere in the world without having a permanent establishment in all those places while most tax regimes place importance on having one for purposes of taxation.
This post seeks to explore these legal amendments and discusses what this means for the Kenyan OM that is characterised by both international and local players and how to navigate these new waters while learning from the forerunners.Continue reading