As technology becomes pervasive throughout our lives and the internet economy meets all industries, new value is created and new business empires launched. As always, government will want its piece of the pie. Kenya’s revenue agency plans to introduce a new digital tax, which targets taxi-hailing platforms, streaming sites and subscription-based digital newspapers, among others.
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We can expect to see more such policies around the world in years to come. There has even been a policy proposal in the US to tax video game currencies. This was intended to target digital currency profits that could be exchange for fiat currencies.
The Kenyan proposal for the new digital tax will affect the operations of companies like Google, Uber, Netflix and the like. The proposed levy will be in addition to a 1.5% digital tax on the value of online transactions introduced in the Finance Bill 2020.
The digital marketplace services that are deemed to be taxable include digital content, streamed shows and music, transport platforms, Web hosting services, search-engine services, subscription-based news and other marketplaces as determined by the commissioner, the Kenya Revenue Authority said in the draft legislation.
If a company that offers one of these digital services fails to register for VAT or assign a tax representative for revenue purposes, they could lost access to their market. It isn’t clear how that would practically work or be implemented by the revenue service, but the intent is clear.
The tech giants that will be impacted by this new law hasn’t commented on the proposed legislation at the time of writing. It also isn’t clear how large of an impact it would have on their businesses in Kenya, as they often report revenues and expenses in African countries in regions. Kenya is a large African market, however, and any additional taxes could impact operations of these companies.
