Market News

Online firms seek review of digital tax citing low user transition 

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Times Tower, the headquarters of the KRA, in Nairobi. FILE PHOTO | NMG

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Summary

  • Firms including Sky Garden, Kilimall, Africa Sokoni, Jumia and Jambo shopping want the government to review the implemented tax and if not, give them a grace period before implementation.
  • The digital service tax), which came into effect at the start of this month, will be charged at a rate of 1.5 percent of the gross transaction value to both residents and non-residents firms and individuals who earn income from the online space.
  • In introducing the tax, the Treasury pointed to the steady increase in online consumer retail purchases on both local and international platforms.

Online shopping firms are lobbying for revision on the digital service tax, saying it will throttle the nascent e-commerce industry.

Firms including Sky Garden, Kilimall, Africa Sokoni, Jumia and Jambo shopping want the government to review the implemented tax and if not, give them a grace period before implementation.

The digital service tax), which came into effect at the start of this month, will be charged at a rate of 1.5 percent of the gross transaction value to both residents and non-residents firms and individuals who earn income from the online space.

In introducing the tax, the Treasury pointed to the steady increase in online consumer retail purchases on both local and international platforms.

However, some firms said that even though the pandemic has led to growth in sales through the e-commerce and adoption of the online spaces by consumers, the transition by consumers to the online platforms is still not as high as expected.

“We are still engaging with the government. We think that as much as the taxation may be beneficial to the government, the ecosystem is young and perhaps we should be given some time to grow,” Africa Sokoni CEO Ebrima Fatty said.

“However, we have done registrations but are still trying to explain why it's not the right time.”

Products to be taxed include downloadable digital content, subscription-based media, software, data management and supply of music, film and games.

Others include search engines and automated help desk services, online tickets, e-learning platforms, audio, vision or digital media and transport hailing platforms.

The firms added that the taxation could mean loss of revenue for companies using different business models.

The KRA projects to collect more than Sh5 billion in the first six months of implementation.