The Kenya Revenue Authority (KRA) recently spoke out on plans to introduce a digital tax on products and services that were delivered through digital platforms such as social media.
The taxman outlined plans to introduce both Value Added Tax (VAT) and income tax on apps that require users to pay for services either through in-app purchases or the apps that require users to pay before downloading. The new digital tax was also targetted at Over The Top (OTT) services and streaming services such as Netflix and YouTube, where the KRA was seeking a piece of the income that these services get from Kenyans.
As per KRA, these services make money through Kenyans and thus should pay their dues in tax to the Kenyan government. However, Google has spoken out giving a warning that such a move could trigger a trade war with other countries, reports Business Daily Africa.
According to Google, the amendments that the Kenyan government wants to make through the Finance Bill 2019 will be in contrary to international tax systems which require companies to pay income tax in the countries where their products are made as opposed to where these products are consumed.
Google’s East Africa Policy and Government Relations Manager, Michael Murungi, while speaking to Kenya’s House Finance committee in Parliament, pointed out that the current proposal of the law would put Kenya at loggerheads with other international laws.
He gave an example of France, where such a law was implemented and U.S.A’s President Trump retaliated by imposing tariffs on France wine. “The risk with this is as we see happening in France after its decision to impose a unilateral tax on international firms on digital platforms. France is now in the midst of a trade dispute with the U.S. Treasury because of that tax which was seen as targeting Google and other multinational firms based in the U.S.,” he said.