TAXATION

Digital service tax an avenue for multinationals to pay their fair share

In Summary
  • The resulting tax legislation lacuna has seen most businesses operate tax free at the expense of the conventional business models
  • The recent move by the government to implement the digital service tax is therefore timely and commendable
The KRA headquarters at the Times Towers.
The KRA headquarters at the Times Towers.
Image: FILE

American business magnate Bill Gates once said that if your business is not on the internet, then your business will be out of business. It is a call that many enterprises seem to have heeded in recent years, courtesy of the robust growth in information communication technology.

For instance, gone now are the days when film enthusiasts would queue at movie shops to buy their favourites films or throng movie theatres. Movie streaming sites are opening online shops every day and can be accessed by their customers conveniently. The same applies to journals, novels and other reading materials, which are now readily available online for purchase. The list of services offered online is endless.    

The Covid-19 pandemic has especially thrown the phenomenal business shift from the brick and mortar model to digital platforms into sharp relief. With reduced and restricted physical contact, migration to digital platforms has been the only way for many businesses to remain afloat.   

Despite the global migration to online platforms, very little, if any, impact has been felt in the national revenue coffers. This has been blamed on the absence of a revenue collection mechanism that suits the new business model. The resulting tax legislation lacuna has seen most businesses operate tax free at the expense of the conventional business models.

The recent move by the government to implement the digital service tax is therefore timely and commendable. According to the Finance Act, 2020, the digital service tax is only meant for services rendered over a digital market space. 

In the spirit of inclusivity, fairness and equity in tax administration, introduction of DST is a way of ensuring that everyone eligible to pay taxes contributes a fair share of revenue towards the country’s development at a reasonable rate.

Multinationals that have for a long time derived their income from Kenya through provision of digital services now have an opportunity to plough back into Kenya for the development of our country.