The New Digital Services Tax Is A Retrogressive Policy

By Soko Directory Team / Published December 16, 2020 | 10:29 am



Turnover tax

Amidst calls for social distancing and avoiding the use of cash owing to curb the spread of Covid-19, the Government has moved to charge Kenyans for opting for safer online shopping; a most counter-productive policy.

Come January 2021, the Kenya Revenue Authority will start levying a digital services tax. This will apply to all online platforms where buyers and sellers interact. A 1.5 percent will apply to the gross value of the purchase. So, for instance, if you buy anything on Jumia, Amazon, or take a ride in a Littlecab, you will on top of your bill, pay an extra 1.5 percent tax.

Ever since the advent of Safaricom’s MPESA mobile payment system in 2009, and the explosion of internet services after the landing of undersea fiber optic cables linking us to other countries, Kenya has embraced online payment for goods and services.

This has been accelerated by the advent of the Covid-19 pandemic which saw the partial shutdown of the country’s industries and restricted travel of Kenyans between counties. Global travel was also grounded and the country closed off its airspace to most passenger traffic.

As a result of the shutdowns and imposition of a curfew under the Public Health Act, online shopping soared. Online retailers like Jumia, Copia, and even Twiga saw the business grow beyond what their existing infrastructure could handle.

The government also stepped in to facilitate this e-commerce. Banks and mobile money services were instructed to waive transaction charges for people transferring amounts less than Sh1000. Indeed, Safaricom, the nation’s largest company, recently announced its half-year results dipped on account of that policy.

Countless other operations have also sprung up and are thriving doing electronic commerce. From food delivery to shopping, books, name it. Indeed, it could be said that business dynamics have changed and we are likely to see a lot more purely online businesses in Kenya. Brick and mortar operations are likely to be a thing of the past.

Which brings us to the baffling question, why would government step in to impose taxes on a nascent economic activity when it should be encouraging it?

To begin with, why would you charge someone for using an online platform to shop? It means if I go to the supermarket, I will pay less if I opt to pay cash instead of swiping my card or paying with MPESA. How does this make any sense? Isn’t it a direct counter-policy to the existing Covid-19 protocols and long-held policy of transforming Kenya eventually into a cashless society?

Secondly, the same government has issued a digital economy blueprint from the Ministry of ICT. It attempts to map out how Kenya can build a formidable digital sector economy. How will this be done when instead of encouraging this process, we are attempting to tax it in its toddler stage?

Manufacturers and big farmers in this country are incentivized with a tax break for buildings and equipment. It is expected that they will contribute to the productive sector thus growing the economy. Similarly, the e-commerce sector is expected to continue to expand and to employ thousands of Kenyans.

Shouldn’t the government give to see that the digital economy needs incentives not tariffs to grow it?

It is a fact that legacy industries in this country are controlled by cartels making it harder for young Kenyans to break into them without patronage. The e-commerce sector is relatively free for our youth to enter and to innovate ideas and businesses at relatively low capital.

The 2019 population Census indicates that 75% of Kenyans are below 35 years old. That is nearly 40 million people! Government policies should look to facilitate these young people into self-sustaining economic activities not imposing hurdles in terms of innovation-killing taxes.

Then the tax is discriminatory against local businesses.

It is a fact that the Big Tech industry mines a lot of Kenyans’ personal data from social media platforms, online sites, and videos and uses the same data to sell to advertisers making millions of dollars.

Why wouldn’t the government first target these companies first and charge them money for exploiting Kenyans data instead of going after small nascent businesses especially in these hard economic times? It is instructive that we are not told how this tax will be used to promote growth in this sector. One suspects, the money is meant to just go towards repayment of irresponsible debts that we have taken on as a country.

The digital services tax is just another example of how out of control this government has become in imposing taxes on Kenyans. The OECD says that Kenyans are now the third most highly taxed people in Africa and we probably rank as high, in terms of corruption and theft of these taxes from public coffers.

It is time parliament put an end to this imposition of arbitrary taxes that have no basis. Kenyans cannot be forced to pay for plundered projects whose funding had been borrowed in the first place but were subsequently not utilized on the ground. It is very insulting.




About Soko Directory Team

Soko Directory is a Financial and Markets digital portal that tracks brands, listed firms on the NSE, SMEs and trend setters in the markets eco-system.Find us on Facebook: facebook.com/SokoDirectory and on Twitter: twitter.com/SokoDirectory

View other posts by Soko Directory Team


More Articles From This Author








Trending Stories










Other Related Articles










SOKO DIRECTORY & FINANCIAL GUIDE



ARCHIVES

2022
  • January 2022 (293)
  • February 2022 (329)
  • March 2022 (360)
  • April 2022 (294)
  • May 2022 (271)
  • June 2022 (232)
  • July 2022 (278)
  • August 2022 (253)
  • September 2022 (246)
  • October 2022 (30)
  • 2021
  • January 2021 (182)
  • February 2021 (227)
  • March 2021 (325)
  • April 2021 (259)
  • May 2021 (285)
  • June 2021 (273)
  • July 2021 (277)
  • August 2021 (232)
  • September 2021 (271)
  • October 2021 (305)
  • November 2021 (364)
  • December 2021 (249)
  • 2020
  • January 2020 (272)
  • February 2020 (310)
  • March 2020 (390)
  • April 2020 (321)
  • May 2020 (335)
  • June 2020 (327)
  • July 2020 (333)
  • August 2020 (276)
  • September 2020 (214)
  • October 2020 (233)
  • November 2020 (242)
  • December 2020 (187)
  • 2019
  • January 2019 (251)
  • February 2019 (215)
  • March 2019 (283)
  • April 2019 (254)
  • May 2019 (269)
  • June 2019 (249)
  • July 2019 (335)
  • August 2019 (293)
  • September 2019 (306)
  • October 2019 (313)
  • November 2019 (362)
  • December 2019 (318)
  • 2018
  • January 2018 (291)
  • February 2018 (213)
  • March 2018 (275)
  • April 2018 (223)
  • May 2018 (235)
  • June 2018 (176)
  • July 2018 (256)
  • August 2018 (247)
  • September 2018 (255)
  • October 2018 (282)
  • November 2018 (282)
  • December 2018 (184)
  • 2017
  • January 2017 (183)
  • February 2017 (194)
  • March 2017 (207)
  • April 2017 (104)
  • May 2017 (169)
  • June 2017 (205)
  • July 2017 (189)
  • August 2017 (195)
  • September 2017 (186)
  • October 2017 (235)
  • November 2017 (253)
  • December 2017 (266)
  • 2016
  • January 2016 (164)
  • February 2016 (165)
  • March 2016 (189)
  • April 2016 (143)
  • May 2016 (245)
  • June 2016 (182)
  • July 2016 (271)
  • August 2016 (247)
  • September 2016 (233)
  • October 2016 (191)
  • November 2016 (243)
  • December 2016 (153)
  • 2015
  • January 2015 (1)
  • February 2015 (4)
  • March 2015 (164)
  • April 2015 (107)
  • May 2015 (116)
  • June 2015 (119)
  • July 2015 (145)
  • August 2015 (157)
  • September 2015 (186)
  • October 2015 (169)
  • November 2015 (173)
  • December 2015 (205)
  • 2014
  • March 2014 (2)
  • 2013
  • March 2013 (10)
  • June 2013 (1)
  • 2012
  • March 2012 (7)
  • April 2012 (15)
  • May 2012 (1)
  • July 2012 (1)
  • August 2012 (4)
  • October 2012 (2)
  • November 2012 (2)
  • December 2012 (1)
  • 2011
    2010
    2009
    2008
    2007
    2006
    2005
    2004
    2003
    2002
    2001
    2000
    1999
    1998
    1997
    1996
    1995
    1994
    1993
    1992
    1991
    1990
    1989
    1988
    1987
    1986
    1985
    1984
    1983
    1982
    1981
    1980
    1979
    1978
    1977
    1976
    1975
    1974
    1973
    1972
    1971
    1970
    1969
    1968
    1967
    1966
    1965
    1964
    1963
    1962
    1961
    1960
    1959
    1958
    1957
    1956
    1955
    1954
    1953
    1952
    1951
    1950