Economy

Web-hosting firm dumps Kenya on punitive taxes

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Kenya Revenue Authority headquarters at the Times Tower in Nairobi. FILE PHOTO | NMG

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Summary

  • Bulgarian web-hosting firm, SiteGround, has stopped signing up new clients in Kenya, citing high compliance costs.
  • The firm blames costly tax-related rules for its exit, shutting the door on start-ups looking to set up online services on a low budget.

Bulgarian web-hosting firm, SiteGround, has stopped signing up new clients in Kenya, citing high compliance costs.

The firm blames costly tax-related rules for its exit, shutting the door on start-ups looking to set up online services on a low budget.

“Due to new local regulations (mostly tax-related), we have recently stopped offering new sign-ups for a number of countries and Kenya is one of them,” SiteGround replied to a Kenyan web designer, who had unsuccessfully sought to sign up an account for a client, via Twitter.

“Complying with said regulations would be expensive for us, making offering our product there not feasible for us.”

Players in the industry have linked SiteGround’s decision to the introduction of Digital Service Tax at the rate of 1.5 per cent of the value of goods or services supplied and sold online from January 2.

The Sofia-based firm — with data hubs in the US, the UK, Germany, the Netherlands, Singapore and Australia — offers free to low-cost hosting services such as domain listing, enterprise solutions and email hosting.

Dennis Macharia, a web designer at Rynode Solutions Ltd, said SiteGround’s hosting for websites such as WordPress and Joomla is popular with Kenyan micro-enterprises because of faster customer support and stronger uptime, unlike some of its competitors.

“It’s a big loss for micro-enterprises wanting to set up online,” he told the Business Daily.

“SiteGround is one of the best worldwide and whenever I have issues with client’s account, they respond fast while other platforms do not even offer customer support.”

The Kenya Revenue Authority (KRA) is targeting about 1,000 businesses “deriving or accruing income” from Kenya through a digital marketplace to register in six months through June 2021, targeting Sh5 billion.

“The way the taxes have been structured lately, the likely effect is that they will lower the eventual tax throughput to the KRA,” Kamotho Njenga, secretary-general for ICT Association of Kenya, said.

“The taxman may think they are getting innovative, but they may be doing a disservice to their bottom line collection because not every investor will go public on why they have … left a given destination.”

Some of the countries which have enforced or are planning to implement digital service taxes include India, Italy, France, the UK, Mexico, Hungary, Austria, Czech Republic, Turkey, Belgium and Spain.