The Kenya Revenue Authority (KRA) expects to earn up to 5 billion Kenyan shillings ($ 45.5 million) in the first half of 2020 from a new tax targeting cryptocurrency exchanges and other online services, said a top KRA official .
First suggested In August 2020, the digital service tax (DST) came into effect on January 2 due to concerns about implementation. The tax is levied at the rate of 1.5% on the gross transaction value on any crypto sale.
Both local and foreign exchanges of digital assets operating in the country will also pay the tax to the Kenyan government. Foreign exchanges such as peer-to-peer platform Paxful and Binance will have to pay the tax every month.
However, Kenyan crypto firms have the option to reclaim their DST at the end of each year as they already have to pay other local taxes.
According to Rispah Simiyu, commissioner of the domestic tax department at the Kenya Revenue Authority, the tax is an appropriate response to the growth of digital activity in the East African country, the continent’s third largest crypto economy.
She predicted that the DST will bring the Kenyan government $ 45.5 million in revenue in the first six months of this year, according to her recent opinion. article for Business Daily, a local newspaper. Simiyu noted that the new tax is “a remarkable step for Kenya,” adding:
[The increasingly digital marketplace] is a promising platform for monetization and a redeployment of tax collection mechanisms is urgently needed. It offers multinationals the opportunity to contribute to the growth of the country where they get their income from. This will strengthen the moral business case for international trade as applied in Kenya.
Kenya is ranked as the third largest bitcoin (BTC) market in Africa after Nigeria and South Africa. On the Paxful P2P exchange alone, Kenyans traded $ 55.3 million worth of bitcoin, or 5,894.8 BTC, over the past five years. The country is Paxful’s eighth largest market in the world, surpassed only by Nigeria in Africa.
Meanwhile, the new tax measures from Kenya have been received with mixed feelings. Lawrence Mungai, a tax expert at PWC Kenya, said the country plans to bring “companies operating in the digital economy that have little or no presence in market jurisdiction” under the tax net.
However, he is not sure whether this goal will be achieved “in light of the different models used by stakeholders in the digital economy worldwide”. A local TV channel reported that players in the digital economy warned that the “new tax could derail the growth” of the nascent sector. It said traders had asked for more time to grow.
What do you think of the new digital service tax in Kenya? Let us know in the comments below.
Image Credits: Shutterstock, Pixabay, Wiki Commons