Budget 2020: What digital tax will mean to the Kenyan economy

CS Yatani, Treasury. Image|Courtesy

The government has introduced a 1.5 percent digital tax value to online activity that takes place in the country.

Speaking during the presentation of the 2020/2021 budget in Parliament on Thursday, Treasury CS Ukur Yatani said some online business transactions do not offer a clear framework of the revenue collected, thus making it difficult to tax them.

“With the fast advancement in technology, many business transactions are increasingly carried out through digital platforms. In some cases, due to the nature of the transactions, it is difficult to effectively tax the income derived through such platforms. It is therefore necessary to provide a framework that will facilitate taxation of such incomes,” said CS Yatani.

Growth in technology has scene growth in online business, coupled with the current COVID-19 pandemic, which has seen companies adopt remote work model.

However, the move could put the country on a collision path with Western governments and multinationals who takes a large percentage in online service delivery in the country.

Early in the year, the US clashed with European nations over digital tax implantations.

France, Italy, Spain, Austria and the United Kingdom announced plans for digital services taxes, which assess a levy based on the online activity, regardless of whether the company has a physical presence.

The New York Times reported that global negotiators set an end-of-year deadline to broker a deal that would set international standards for how, and where, online activity may be taxed.

See also: Musalia Mudavadi: Our economy is at stake –politicking won’t help during Covid-19 pandemic

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