Online shopping keeps consumers out of KRA reach

“The tax laws can be amended and technological infrastructure set up to put the obligation on consumers to pay taxes on the value of their spend on intangible goods in a reverse, self-assessment system,” Shah said.

The internet has created a border-less environment, knocking down national boundaries that governments depend on to tax residents and nationals, leading to a raging debate on whether or not to tax e-commerce.

Some analysts say the value of tax from e-commerce transactions is still small but will rise in the coming years, adding that failure to tax e-commerce will leave governments with a smaller tax base.

In such a case, States are likely to increase direct taxes to fund public projects, a move that will hurt trade and investments.

In addition, raising taxes is seen as a way of entrenching equity in global trade.

“What is important is to correct the competitive imbalance and to establish an equitable taxation structure that addresses e-commerce in a fair and realistic manner,” the European Commission said when it introduced taxes on e-commerce in Europe.

But others argue that levying tax on e-commerce will hinder its growth.