The Kenya Revenue Authority (KRA) is sourcing for digital service partners that will help the authority collect tax in the digital economy as a way of increasing its revenue collection.
KRA Commissioner Strategy, Innovation and Risk Management Mohamed Omar says the authority will be looking to mobile commerce, which is valued at Sh6 trillion, to increase its sources of revenue.
The taxman will also target mobile money transactions whose value closed at Sh3.98 trillion in 2018, buoyed by business transactions.
“Ours (economy) is mobile-based and if you look at financial inclusion 10 years ago, it ranged between 25-27 per cent and has now increased to 82 per cent and that is the essence of us targeting the digital space since it is a very key growth area,” said the Commissioner.
Total tax collections in the financial year ended last month increased by Sh100.1 billion to Sh1.44 trillion but fell short by Sh72.7 billion of the targets set by Treasury.
Omar says KRA is sourcing for digital service partners that will help with the creation of the system to be used by different digital economy platforms.
“This will allow KRA to collect taxes at source, through a digital means so that the proportion of tax is remitted on a real-time basis,” he adds.
Omar said that the digital economy is best taxed through equally digitized systems and processes, backed up by solid infrastructure and skilled human capital in the areas of data, IT and software development.
Kenya will not be the only country attempting to tax the digital economy. According to KPMG International, Israel and India have introduced significant economic presence tests for creating permanent establishments.
At the same time, specific tax regimes for multinational enterprises have been introduced, for example, by the UK and Australia with diverted profits taxes and by the US with its base erosion and anti-abuse tax.
Turnover taxes have been introduced for targeted sectors, such as Hungary’s tax on digital advertising and Italy’s levy on digital transactions.