This archive report was first published on 6 May 2020.
As the government seeks to fund its Kshs 3 trillion 2020/2021 financial year, experts are warning against the introduction of a digital service tax that could lead to double taxation.
According to Ernst and Young Tax Partner Francis Kamau, the government needs to reconsider the implications of the proposed 1.5 percent withholding tax, which could result in double taxation.
Speaking on the proposed tax, Kamau noted that the state needs to study the implications of the move, including double tax treaties and the cost of collecting the tax through agents.
Ernst and Young also discourages proposals to introduce a minimum tax, which could negatively impact loss-making entities, as well as taxing National Social Security Fund income.
However, recent incentives to reduce PAYE and corporate income tax have been backed to salvage losses brought about by the Coronavirus pandemic.
The government has also been advised to promptly introduce a warehouse receipt system to ensure credit flows to the agriculture sector, helping it to bounce back.
On April 30, the Kenya Revenue Authority (KRA) directed business owners trading on digital platforms to charge Value Added Tax on their transactions and remit the taxes to KRA.
Online retail businesses became the subject of taxation in 2019, following amendments to the Finance Act, which clarified that income from digital transactions attracts Value Added Tax.
