CS Mbadi Reveals How The Gov’t Will Tax Digital Platforms
Treasury Cabinet Secretary John Mbadi has outlined the government’s plan to increase tax collection through the digital marketplace in order to reduce the country’s current fiscal deficit of Ksh.170 billion.
Following a Supreme Court ruling that overturned the Court of Appeal’s decision to strike down the Finance Bill, 2024, the government intends to reinstate certain tax provisions that were initially removed from the contentious bill.
The provisions will be combined into three new bills: the Tax Laws (Amendment) Bill, 2024; the Tax Procedures (Amendment) Bill, 2024; and the Public Finance Management (Amendment) Bill, 2024.
Similar to the Finance Bill, the Tax Laws (Amendment) Bill, 2024 will seek to amend Section 3 of the Income Tax Act to include more digital operators into the tax brackets.
John Mbadi: One of the reasons why our tax revenue collection is not growing at the rate at which we want it to grow is because of the difficulty in taxing the digital economy#JKLive @SamGituku pic.twitter.com/HOiUpVo4qz
— Citizen TV Kenya (@citizentvkenya) November 6, 2024
This will include ride-hailing, food delivery, professional, freelance, and rental service providers, ensuring that these industries contribute to the national revenue stream.
Mbadi emphasized that one of the challenges to achieving the desired growth in tax collection is the difficulty in taxing the digital economy.
The CS spoke on Citizen TV on Wednesday during a town hall session held at Daystar University in Nairobi.
“One of the reasons our tax collection is not growing with the GDP and at the rate we want is that there are difficulties in taxing the digital economy. The agricultural, informal and digital economies are hard to tax,” said the CS.
Mbadi, on the other hand, believes that technology can help to solve the problems, citing ongoing efforts to modernize and upgrade the Kenya Revenue Authority (KRA) technology system in order to improve revenue collection for digital marketplace players.
“That is why we have technology, presently we have been talking a lot about modernizing and improving the KRA I.T system and the system is being put in place,” he said.
Humphrey Wattanga, Commissioner General KRA: KRA is working on technology solutions that will allow us to have visibility into the transactions that happen within our IP. Using that, we shall then be able to administer taxation#JKLive @SamGituku pic.twitter.com/ZhCKwDin0Y
— Citizen TV Kenya (@citizentvkenya) November 6, 2024
“Phase 1 has been rolled out and we are going to phase two and we are going to enhance tax visibility not only in the digital space but also the informal sector.”
Treasury Principal Secretary Chris Kiptoo, who was also in attendance, echoed Mbadi’s sentiments, noting that while digital marketplace players contribute significantly to the economy, their tax contributions have been low historically.
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PS Kiptoo also stated that proposals currently before Parliament include a “minimum top-up tax” and a framework for taxing businesses with a “significant economic presence” in Kenya, even if they do not have a physical presence.
This is especially important because companies operating through digital marketplaces without local ownership or physical offices will still be required to pay taxes in Kenya.
“We have defined digital marketplace and we are trying to broaden the number of services under digital marketplace,” he noted.
“Any owner or operator of a digital marketplace is also supposed to pay tax. Uber for instance …the owner is not Kenya but is present. We are targeting the owners, particularly of where the digital transactions are taking place.”
CS Mbadi Reveals How The Gov’t Will Tax Digital Platforms
