Blog Post

13 Dec
By: Ferdinand Musungu 0

ICT SECTOR BOARD MEETS KRA TO DISCUSS DIGITAL ECONOMY TAXATION

On 10th December 2019, KEPSA ICT Sector Board led by Vice Chair, Mr. Ben Roberts, met with Kenya Revenue Authority (KRA) Commissioner in charge of Strategy and Innovation, Dr. Mohamed Omar, to discuss Taxing the Digital Economy. The meeting was to appraise KRA on the study and what it will do to the Digital economy.

In his remarks, Mr. Ben Roberts, appreciated KRA for taking time to meet with KEPSA and build on the sector tax dialogue meeting held earlier in the year. He introduced the study to KRA and informed the meeting that KEPSA had commissioned Strathmore University to work on the study. He went on to add that a lot of investment has been made in the ICT sector in most counties. He concluded by urging KRA to help facilitate trade through mobile phones.

Mr. Martin Mbaya from Strathmore further elaborated on the study by introducing the models involved and how they were derived. The study applies two frameworks (the innovative governance framework and the Digital tax policy framework) through a desktop review of existing literature, multiple stakeholder interviews and set of meetings. The findings are categorised using a 3-dimensional framework that yields an 8-part model as a basis for structuring of the digital marketplace. The model considers three key factors (sovereignty, transaction and platform – STP) to answer questions (who, what, how, why, where and when) on taxation of the digital marketplace.

The STP model yields a possible toolkit that can inform KRA regulations for governing taxation of the digital marketplace. The 8 key parts are:

Model 1 – Domestic Trade Enable covers domestic entities that use a platform to enable trade (exchange of goods and/or services between two parties) as a producer.

 Model 2 – Domestic Payment Enable covers domestic entities that use a platform to enable payment (transfer of value between two parties) as a producer.

Model 3 – Domestic Trade Enabled covers domestic entities that are enabled by a platform to undertake trade (exchange of goods and/or services between two parties) as a consumer.

Model 4 – Domestic Payment Enabled covers domestic entities that are enabled by a platform to facilitate payment (transfer of value between two parties) as a consumer.

Model 5 – Non-Domestic Trade Enable covers non-domestic entities that use a platform to enable trade (exchange of goods and/or services between two parties) as a producer.

Model 6 – Non-Domestic Payment Enable covers non-domestic entities that use a platform to enable payment (transfer of value between two parties) as a producer.

Model 7 – Non-Domestic Trade Enabled covers non-domestic entities that are enabled by a platform to undertake trade (exchange of goods and/or services between two parties) as a consumer.

Model 8 – Non-Domestic Payment Enabled covers non-domestic entities that are enabled by a platform to facilitate payment (transfer of value between two parties) as a consumer.

In his remarks, Dr Omar appreciated the study and assured KRA’s support. He added that they are willing to engage further on these tax incentives and look to establish a desk at KRA for non-domestic entities in the digital economy.  He concluded by asking private sector to: have continuous engagements on this conversation; work on a comparative analysis on the outcomes that have normal rates; find ways in which industry and KRA work together; and have a transparent based system.

Leave a Comment

Your email address will not be published. Required fields are marked *