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

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 seen growth in online business,
coupled with the current COVID-19 pandemic, which has forced companies to 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.