KRA recently announced plans to start demanding tax from apps on downloads. In the announcement, KRA will reportedly work with the Communication Authority of Kenya to obtain transactions data by foreign and resident-based developers doing business in Kenya. The taxman is targetting to collect sh 6.1 trillion by 2021 and is widening its tax net to achieve this goal. Kenyan developers got pretty vocal after this recent announcement.
We're doing the equivalent of finding every single pair of pants we ever wore and checking the pockets for forgotten money… https://t.co/6r21gCpIva
— Eric Mugendi (@mougendi) August 15, 2019
I spoke to Irving Amukasa, SophieBot CEO who said that it has been impossible to publish paid apps on the Google Play Store. Irving together with Frank Tamre, Moringa school co-founder who now runs Early Camp and Marvin Collins of Apps:Lab KE spearheaded talks with Google for local Kenyan developers to have merchant accounts after MPESA payments were made available which allowed the purchase of paid apps via M-PESA.
Like they are the ones who fought for merchant accounts for us https://t.co/WHJLp6i3Vg
— The man in near constant motion (@iamukasa) August 15, 2019
Irving thinks that the government is applying double taxes as it already taxes Google and the companies running the apps in a community that still hasn’t yet embraced local paid apps. He continues to argue that this isn’t a well planned and thought out as its government trying to meet its goal of collecting sh 6.1 trillion and fill its coffers. Irving fears that this will mess with the developer ecosystem when they start paying taxes twice to the government and that some developers won’t activate deploying their apps in Kenya.
Martin, an independent developer told me that it would be difficult to track app revenue as most apps have unique purchase systems and charging tax on downloads won’t work as unlike statistics on play store, actual application downloads and retention are hard to track. He continues telling me that people will find a way to bypass this.
“What’s next? Cracking down on revenue-generating websites too?” he concludes.
Michael, another developer tells me via email that this recent announcement is not the right move as we don’t have an app economy and that most of the apps that dominate locally are foreign apps which are either free or paid. He shared with me that KRA should impose different taxes on different products and services.
He continues to tell me that this won’t hinder the local development of apps but will also not help in increasing the low monetization rates of the few local apps that we have which should be the priority.
Michael also raises the issue of double taxation arguing that developers are already taxed by the app stores on behalf of the countries they operate in. He offers a solution that there should be a conversation between the apps stores and the government to figure out a proper way.
Denis adds that KRA is already making it worse for consumers who already suffer from the unavailability of certain region-specific apps like Spotify and that this recent announcement will make many developers will simply stop providing apps in the country.
When I asked Irving about what the right way should have been to resolve this, he told me that Treasury and the ICT Ministry need to meet with the local developer community and that if they plan target big tech, they should make a big tech law like the one France is about to do to fill the loopholes for foreign inflow.
The big tech companies including Google, Facebook and Amazon are set to testify against France’s digital tax next week.
The government has to figure out a better way to collect the country’s taxes without involving these knee-jerk reactions, Michael adds.
Time will tell how this plays out when KRA implements it but as for now, the taxman is waiting for the Multilateral Convention on Mutual Administrative Assistance in Tax Matters which is a treaty that allows it to exchange and get specific data on tax evaders across the world.