KRA’s New Unit Will Track Revenues in Digital Economy


kra vat online merchants

The Kenya Revenue Authority has set up a special unit that will track revenues made in the digital economy as reported by Business Daily.

“To ensure that the digital market sector pays their fair share of taxes, KRA has set up a dedicated unit to facilitate the taxpayers in this sector in the determination and accounting for taxes,” deputy commissioner in charge of policy and domestic taxes, Caxton Masudi told the publication.

“We intend to use transaction tracers through data-driven detection in taxing multinationals as we roll out taxes on digital businesses,” he added.

The draft Finance Bill 2020 proposed an introduction of a 1.5% digital tax for online sales. The Treasury CS acknowledged that some of these transactions are difficult to effectively tax and this new tax will remedy this.

According to the draft Value Added Tax Regulations 2020, taxable digital content includes downloaded products like e-books, apps, movies and adds subscription-based media like news, magazines, TV streaming, podcasts, and online gaming.

Kenya’s budget for the 2020-21 financial year was set at 2.79 trillion of which the government expects total revenue of 1.89 trillion from taxes. The biggest tax earners for the govenrment include VAT (25% of total taxes levied) and the government is probably doing this to bolster their VAT revenues. The COVID-19 pandemic also forced the government to lower income tax payments for Kenyans which means loss in income tax and this could be the government’s way of getting that money back.

It will be seen how effective that special KRA unit will be in delivering the revenue targets that the treasury would have imposed on them.