The World Bank has supported Kenya’s efforts to widen the taxman’s reach in the digital marketplace.
The lender says the measures are a step further in the country’s quest to widen its tax base and bolster domestic revenue mobilisation when raising financing from external sources is challenging.
According to the multilateral lender, the introduction of Value Added Tax (VAT) on digital supplies and the introduction of withholding tax on financial derivative gains by non-residents, among other measures should help realise 0.7 percent of GDP or just about Ksh93.6 billion ($665.25 million) in additional tax revenue by 2024.
The Treasury published the Value Added Tax (Digital Marketplace Supply) Regulations, 2020 on October 9, 2020, and tabled them before the National Assembly on February 16, 2021.
The regulations operationalised the collection of the VAT.
“The government issued new VAT regulations on supplies through the digital marketplace (Electronic, Internet Digital Marketplace Supply) by providing the interpretation, scope, simplified registration framework, appointment of tax representatives, place and time of supply, accounting for and payment of tax, claim for input tax and penalties,” the World Bank states.
“These will complement the package of reforms that the government is undertaking to expand the revenue base and raise compliance by preventing evasion, corruption, and money laundering.”
Further, efforts around streamlining the country’s Excisable Goods Management System (EGMS) have been lauded by the World Bank.
The Kenya Revenue Authority (KRA) rolled out EGMS in 2012 with a view to improving the collection of excise tax in the country through the enhancement of product traceability and the weeding out of illicit products.
In the recent past, KRA’s Ksh4.6 billion ($32.69 million) five-year-long contract with SCIPA Security Solutions for the supply of excise stamps has come under close scrutiny.
“The government has also issued EGMS regulations to amend the provisions concerning excise stamps on excisable goods, exemption from excise stamps, and disposal of forfeited and seized goods. To streamline implementation, excisable goods required to have excise stamps are now listed in the first schedule of the EGMS regulations. The amendments will promote fair administrative justice by introducing a new provision for a notification to the owners of seized or forfeited goods before disposal, as well as widen the provision on the application for licence or registration and the minimum specifications for metering, measurement, and monitoring devices,” the Bank says.
In the financial year 2023/24, the government targets to mobilise Ksh2.5 trillion ($17.77 billion) through ordinary revenue, piling pressure on KRA.
To help realise the ambitious revenue targets the Finance Act of 2023 has introduced a Digital Assets Tax at the rate of 3.0 percent of the gross fair market value consideration received or receivable at the point of exchange or transfer of a digital asset such as a cryptocurrency.
