World Bank Urges Kenya to Go Easy on e-Commerce in Revenue Drive
World Bank Urges Kenya to Go Easy on e-Commerce in Revenue Drive
The World Bank cautioned Kenya against imposing taxes that will curb growth of technology enterprises in its drive to ramp up revenue and narrow its budget gap.
The taxes could increase revenue in the short-term, but ultimately cause “unintended disincentives to the growth of the digital economy,” the World Bank said Thursday in a report.
The government plans to increase borrowing to fund President Uhuru Kenyatta’s agenda --to improve manufacturing, housing, farming and healthcare-- and raised its 2019-20 fiscal-deficit forecast to 6.2% of gross domestic product. To manage debt levels, with 43% of domestic liabilities due in less than a year, authorities plan to boost revenue.
Like peers Uganda, Zambia and Zimbabwe, Kenya is looking to increase taxation in the telecommunications industry, which together with the financial sector account for 60% of the nation’s corporate-income tax. Mobile-money transfers increased 10% last year to 3.98 trillion shillings ($38.5 billion), more than one third the value of the economy, even after the government raised excise tax on such transactions to 12%.
The government plans to enhance capabilities to track and tax e-commerce transactions on domestic and foreign platforms, in line with this year’s budget that proposes taxes in the digital economy.
Since the services are offered across national borders, countries should jointly discuss tax policies for the digital economy, according to Casey Torgusson, a co-author of the World Bank’s Kenya Economic Update report. “If you did that at an individual-country level, you would end up with multiple layers of taxation, sometimes over and above what the company is generating in terms of profits.”
The Washington-based lender forecast Kenya’s economic growth this year at 5.8%, compared with a 5.7% projection in April.
To contact the reporters on this story: Ramah Nyang in Nairobi at rnyang2@bloomberg.net;David Herbling in Nairobi at dherbling@bloomberg.net
To contact the editors responsible for this story: David Malingha at dmalingha@bloomberg.net, Helen Nyambura
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