Tech giants face tripled digital tax in fresh plan
Digital service providers including US tech giants Google, Netflix, Meta, Twitter and Microsoft could face steeper levies as regional tax authorities proposed a uniform five per cent Digital Service Tax (DST) across the economies of the East Africa Community bloc.
Digital service providers including US tech giants Google, Netflix, Meta, Twitter and Microsoft could face steeper levies as regional tax authorities proposed a uniform five per cent Digital Service Tax (DST) across the economies of the East Africa Community bloc.
The push for a five per cent DST was reached at a joint meeting of national tax agencies from Kenya, Uganda, Burundi, Rwanda, Tanzania, South Sudan, and Zanzibar.
A report by the Uganda Revenue Authority (URA) revealed that the 50th meeting of the regional tax agencies resolved to step up taxation of the digital economy with a proposed uniform five per cent tariff.
“The forum committed to taxation of the digital economy and tasked the Kenya Revenue Authority (KRA) to convene a virtual engagement to empower other revenue authorities on the legal framework and implementation of the Digital Service Tax. It was further agreed in the meeting to engage the respective governments to promptly implement a uniform DST rate of five per cent across the region,” the dispatch by the URA stated in part.
E-commerce increase
Increased uptake of e-commerce has made DST a promising source of revenue for governments worldwide.
Kenya pioneered the DST concept in the EAC bloc under the Income Tax (Digital Service Tax), 2020 law, which was implemented on January 1, 2021. Under the law, all businesses selling services online in Kenya are required to pay a flat tax of 1.5 per cent on the value of services offered through digital platforms, in addition to a 16 per cent value-added tax (VAT).
If adopted the proposed EAC tariff would mean tech firms in Kenya would pay more than triple the present levy rate.
Tanzania, through a Finance Act, also introduced a two per cent DST in addition to 18 per cent VAT last July.
“Digital service providers like Amazon are earning big from our economies with a small or no revenue contribution, it is high time we tapped into this platform. More so Kenya has taken lead hence the need to follow suit,” Commissioner-General of the Uganda Revenue Authority Mujoki Musinguzi is quoted in the URA dispatch as having said following the joint forum of the EAC tax authorities, which was hosted by Uganda.
The KRA collected Sh174 million in DST in the six months to December 2022 against a full-year target of Sh241 million.
Services targeted under the DST include e-books and movie sales, dating sites, music, and games, and subscription-based media including news, magazines, and digital content.
In the first six months after its implementation to June 2021, KRA collected Sh42 million and Sh241 million in the financial year ending June 2022.
