Published On: Wed, Dec 11th, 2019

Kenya’s new “Uber” tax on digital businesses and services could spark US trade retaliation

Kenya will start levying new tax on digital markets under a new lawsigned by the president early in November. The Finance Act seeks to broaden the Income Tax Act net to include income accruing through a digital market place.

The law defines the digital marketplace as “a platform that enables direct interactions between buyers and sellers of goods and services through electronic means.”

Kenya will start levying new tax on digital markets under a new lawsigned by the president early in November. The Finance Act seeks to broaden the Income Tax Act net to include income accruing through a digital market place.

The law defines the digital marketplace as “a platform that enables direct interactions between buyers and sellers of goods and services through electronic means.”

But this is easier said than done. In 2016 India imposed digital taxeson technology companies involved in digital advertising. In 2018 the country introduced a provision requiring companies to pay tax on domestic income accrued from a digital platform. The provision requires non-resident big tech companies to pay direct taxes on domestically earned income.

In retaliation, the US conducted an inquiry and capped the number of Indian foreign workers. The move was detrimental to India.

Earlier this year France imposed a digital tax on big tech multinational companies. It required them to pay a 3% tax on total annual revenue generated. This sparked a trade war with the USwhich saw this as double taxation of its companies and their partners. But two months later, the two countries agreed on a compromise. France said it would tax big tech companies but scrap the tax as soon as the Organisation for Economic Cooperation and Development comes up with a way to properly tax tech companies. And it agreed to refund any over-payments that might occur in the meantime.

OECD’s proposed model

The OECD is an intergovernmental economic organization, founded in 1961 to stimulate economic progress and world trade. Countries use its model convention on taxation as a template for allocating taxation rights between them.

Source: Qartz

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