Editorials

Put in Kenya’s interest first in global tax talks

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President Joe Biden. PHOTO | AFP

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Summary

  • Kenya has rejected the global minimum rate of tax on international companies, fearing the deal will bar it from collecting its taxes from multinational tech giants.
  • The Kenya Revenue Authority (KRA) says joining the minimum tax club requires dropping individual plans such as the recently introduced digital tax that Kenya charges at 1.5 percent of the sales of multinationals such as Google, Facebook and Amazon.

Kenya has rejected the global minimum rate of tax on international companies, fearing the deal will bar it from collecting its taxes from multinational tech giants.

The Kenya Revenue Authority (KRA) says joining the minimum tax club requires dropping individual plans such as the recently introduced digital tax that Kenya charges at 1.5 percent of the sales of multinationals such as Google, Facebook and Amazon.

The KRA estimates the digital tax would fetch Sh13.9 billion in the next three years. So, it is a question of maths and what makes more revenue sense to a particular country.

However, there are more considerations to make, including being investor-friendly to the multinational companies whose presence means more jobs to the youth; this ties it to the issue of security.

Already, the US and Kenya are negotiating a free trade deal and the tax argument adds another hurdle to the talks whose conclusion is not in sight yet.

What’s more, some of the big players such as the G20 group of economies have joined the 136 countries backing the minimum tax plan that is driven by the US.

In Africa, big players, including South Africa, Egypt and Morocco are for the minimum 15 percent corporate tax.

Because the world spins on trade and business, Kenya ought to reassess whatever deal that is tied to the global minimum tax and what it portends to the economy when challenges like jobs are giving the country sleepless nights. Apart from the tax revenues that Kenya sorely needs, handling this tax deal will require more informed negotiations. Of course, negotiations of this type are laden with intense lobbying, with parties expected to give and take.

It is important to note that presidents Joe Biden and Uhuru were meeting yesterday and the tax issue was expected to form part of the agenda.

Above all, Kenya should only pick what it is comfortable with and do so without undue pressures from any quarters, putting its interest first.