Enforcement of the Digital Economy Taxation
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Date
18-08-21
Authors
Kapkai, Philip
Muthee, Irene
Ngala, Bonaventure
Musa, Nuh
Wanyeri, Ann
Gathoni, Evelyn
Journal Title
Journal ISSN
Volume Title
Publisher
Kenya School of Revenue Administration
Abstract
Kenya has seen tremendous growth in the use of technology with internet penetration at 89.5%
of the population as at December 2019. Intense reliance on technology has been noted hence
causing a huge transformation in the business environment. Finance Act 2019 (the “FA 2019”)
amended the Income Tax Act to provide for taxation of income accruing through the digital
market place. Taxation of digital economy has imposed new enforcement challenges to tax
policymakers, tax authorities and governments. The challenges are attributed to complex nature
of transactions carried out in the digital economy. The study identified several gaps such as
difficulty in determining transactional value on income accrued or received in Kenya as
harboured by jurisdiction issues in which value creation occurred. The gap will be addressed
by review and amendment of Kenya’s double tax treaties, KRA and Communication Authority
of Kenya to liaise in mapping of IP addresses to help in tracking transactions. Additionally, it
is important to frame the DST around various revenue streams. Further, the research proposed
raft of changes in the DST Act to minimise the potential for tax evasion and avoidance.
Considering the legal perspective, the current Kenyan concept of permanent establishment
especially regarding digital tax, does not establish a taxable presence. This is because it is
mainly based on an entity as being physically present or having a physical representative in the
country. Therefore, it will be necessary to come up with parameters defining what amounts to
a digital permanent establishment (PE) or circumstances that will trigger a digital PE in Kenya.
Without a nexus, KRA runs the risk of countless disputes.
Description
Keywords
intelligence-driven, big data, analytics, customs, machine learning
Citation
Philip, K., Muthee, I., Ngala, B., Musa, N., Wanyeri, A., & Gathoni, E. (2021). Enforcement of the Digital Economy Taxation. African Tax and Customs Review, 4(1), 23. Retrieved from https://atcr.kra.go.ke/index.php/atcr/article/view/72