A Kenyan expert on Tuesday urged the government to review its plans to tax digital platforms as part of its efforts to fund the 3 trillion shillings (about 28 billion U.S. dollars) 2020/2021 budget.
Bitange Ndemo, a former principal secretary in the ministry of ICT, also cautioned that such a move would be counter-productive to plans to expand the country’s tax-paying base.
“Taxing digital companies that are not domiciled in Kenya is impossible. They have brought more benefits to the Kenyan economy than we thought,” said Ndemo who was speaking in Nairobi during a pre-budget webinar organized by audit firm Ernst and Young (EY) for clients and media on government proposals in its 2020/2021 budget.
The event which is held annually by EY Kenya is aimed at providing industry with the platform to raise issues around the government’s fiscal measures.
In a statement issued after the meeting, Ndemo said that in the past, India and France had tried using the same route to raise taxes but failed miserably.
The plans to tax such digital platforms such as WhatsApp and Facebook have been mooted by the Treasury cabinet secretary, Ukur Yatani as part of increased efforts to meet and fund a budget that is currently faced with more challenges than before.
The challenges include infrastructure projects and reviving an economy that has been bashed by effects of the COVID-19 pandemic.
However, Ndemo warned that such an idea will affect SMEs that have traditionally used the digital platforms to sell and market their services.
“This taxation measure is not easy to implement. IT should be approached from a bilateral level using the African Union as a spring-board. It needs to the thought through by looking at the benefits Kenya has gained as compared to the money treasury is seeking out,” Ndemo said.
“These digital platforms have brought more benefits… and any plan to tax them will destabilize Kenyan SMEs that depend on them to do business,” said the former government official.
A tax partner at EY, Francis Kamau warned the meeting that the plan to introduce a 1.5 percent tax through withholding tax for the digital platforms needs to be reviewed because it will hit industry hard.
“The fear among industry and SMEs is that this will amount to double-taxation,” Kamau said, adding that the government should have delayed the proposed tax to allow more consultations. Enditem