Kenya Revenue Authority (KRA) roped in one million people into the tax bracket since June last year saying there is scope to expand the base from five to seven million by June 2021 leveraging technology and e-commerce.

To capture more active taxpayers, KRA says it will leverage on data analytics and has identified the digital economy as a key component to expand the tax base eying online transactions for tax obligations.

Those likely to be affected include Jumia, Yahoo, Google, Uber, Netflix, Facebook and YouTube amid mixed reactions on taxing tech giants. KRA has floated a tender seeking a consultant to help KRA institute the tax measures.

Speaking during the taxpayers’ week in Nairobi yesterday, KRA commissioner in charge of strategy and innovation Mohammed Omar said already, the authority is in discussions with the Central Bank of Kenya (CBK), financial institutions and other business associations over possibilities of e-commerce taxes.

Having broadly targeted professional groups, small, medium and micro enterprises to expand the base in the recent past, Omar said that tax analytics, online transactions and rentals will be the next frontier to boost revenues.

Analysts think the appetite for online taxes is informed by feeling that some tech companies pay little or no corporate tax on revenues from, say online advertisement sales, in countries where they do not have a large physical presence since they declare most of their profits abroad where they are headquartered.

Omar said fear of double taxation does not arise, adding that if value is generated in Kenya but earned elsewhere, then something should be done by KRA.

“We need a procedure on taxation in this sector amid an ongoing global push for the same by Organisation for Economic Co-operation and Development (OECD),” he said.

Revenue windfall

This is an ongoing discussion as Kenya tries to tax online service providers for wealth created in Kenya. 

Speaking to Business Hub, Jumia said it is tax compliant thus they do not see any special changes having an impact on them or their consumers in the near future. Would Jumia be open to third party access to its back end systems on its digital platforms to audit and collect the said taxes?

“No comment, as we are not aware of this at the moment nor has KRA reached out to Jumia for the same,” said the e-commerce player in a statement.

OECD wants to make big tech firms pay taxes in countries where they have a significant number of users, a proposal that could lead to a revenue windfall for a country like Kenya which has a huge online presence.

This would alter international tax principles even as Kenya awaits Parliament to make rulings on proposals over the online tax bracket.

“Question is, where do we have a convergence point?” said Omar.

Third party information

As part of the processes to mine data to expand the tax base, KRA also plans to deepen tapping third party information through its integrated interface programme.

The authority has invested on a tax filing system, iTax, which has now been linked to bank accounts of firms doing business with the government through Integrated Financial Management Information System (IFMIS).

Mining data from transactions such as those of Kenya Power and professional bodies is meant to enable KRA to act from an informed position.

“The tax authority has jurisdiction to access such data for tax purposes,” he said.

KRA is also working on integrating county government systems into the network through a unified and streamlined system so as to leverage on the information for tax services and investigations.

Other sources of data mining for KRA include utilities such as water companies and even banking information which the authority has easy access to in the course of their duties.

“We look for such information not only to demand taxes, but also to provide appropriate services to taxpayers,” said Omar.