The Kenyan government has implemented taxes on Internet businesses and entrepreneurs. It wants to bring up to 1,000 companies and individuals under its tax bracket which, it claims, could generate up to $45 million (Ksh 5 billion) in revenue by June 2021.
The Kenya Revenue Authority (KRA) publicised the Income-tax (Digital Services Tax) in 2020, following the Finance Act 2019. Businesses and Individuals would pay a 1.5% fee on the value of goods and services sold or offered online.
Some of these services include e-books, movies, music, games, theatre and event tickets, news platforms, magazines and other digital content.
Recall that in June 2020, the tax regulator set up a special unit to track revenues on every digital transaction in the country. But it placed the onus on companies to register and start paying their taxes.
It also seemed like this move could hit a potential snag with the launch of a trade agreement between Kenya and the US.
The KRA claims that resident and non-resident businesses offering services in Kenya have started registering. It expects the number to hit 100 before the week runs out, and 1000 by June 2021.
The COVID-19 induced disruption has moved several businesses online, and the KRA expects this to work in its favour in 2021.
While businesses are moving online, and tech giants like Amazon have raked in substantial eCommerce revenues, this expectation might not be so straightforward in Africa.
Besides the obvious issues of a shaky commerce infrastructure, the pandemic has negatively affected online and offline businesses. Even eCommerce behemoths like Jumia attest that consumers spent more on low-value essential items in 2020.
The disruption of shipments also meant online vendors have to spend more on fulfilment expenses. At a media meetup in December 2020, Juliet Anammah, Chairperson for Jumia Africa, explained that Africa needs to focus on long term business growth instead of immediate gain.
The implementation might prove to be tough, and it remains to be seen what the outcome would look like.
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