KRA lays ground for digital tax roll-out

Online Shopping E-business Digital Technology Concept [Courtesy]

Taxman has invited bids for a new system to monitor online transactions between merchants and their customers.

Kenyans transacting goods and services online will soon begin paying income tax and Value Added Tax (VAT) as the Government moves to implement the controversial digital tax.  

The Kenya Revenue Authority (KRA) has kicked off the search for a technology service provider to install a monitoring and payments system that will track and audit transactions between both local and international merchants and their customers.

The tax collection system will entail an integrated payment gateway solution to identify and authorise payments through the settlement of data to and from merchants’ online portals to their banks.

“In a bid to enhance tax compliance in the Kenya digital economy, KRA seeks to acquire an innovative tax collection service for digital platforms with a presence in Kenya,” said the taxman in a call-out for bids.

Treasury proposed the introduction of taxes on digital economic activities in the Finance Bill, 2019 as one of the means of increasing revenue collection following a Sh100 billion shortfall last year.

The new system will give the taxman the ability to monitor online trade transactions between both local and international merchants and their customers in the country.

This is bound to raise opposition from some stakeholders given the implications of sharing sensitive corporate and consumer data with third parties. At the same time, the Government is relying on a broad description of digital economic activities that does not distinguish between large e-commerce players like Amazon or Safaricom’s Masoko and individuals selling clothes on Facebook and Instagram.

“The solution should provide for analysis and dash-boarding/reporting in real-time and have audit trail capabilities,” explained KRA in the notice.

KRA also wants the service provider to integrate the system with all internal revenue systems for data sharing purposes and updating of taxpayers’ ledger accounts.

The digital tax has been criticised by some stakeholders in the industry as retrogressive to the growth of the economy.

Tech giant Google last month told Parliament that the digital tax could raise the cost of products and services in the country, adding that it amounts to double taxation and could precipitate a price war.