(Bloomberg) — Kenya should join the global minimum-tax deal instead of pushing for unilateral measures, the Organization for Economic Co-operation and Development said in comments about the nation’s plans to double its digital levy.
The East African country’s National Treasury seeks to increase its digital-services tax to 3% from 1.5%, according to the Finance Bill 2022. The proposal on the levy, which applies to foreign companies that provide online services in Kenya, will become effective if lawmakers approve it and the president signs it into law.
Kenya continues to be a holdout from a deal that the Paris-based OECD brokered for a global minimum tax rate that involves reallocating a slice of the largest multinationals’ profit to market jurisdictions. The few countries resisting the plan have raised concerns on how the proposal will affect them.
“Kenya is one of the rare countries which has not joined the agreement reached on 8 October,” an OECD spokesperson said in an emailed response to questions. “We note Kenya’s proposed legislative change,” the OECD said, adding the country should “consider removing its unilateral measure, and join the deal once the technical work is completed.”
The government is battling to curb a budget shortfall estimated at 862.5 billion shillings ($7.5 billion), or 6.2% of gross domestic product, for the year starting July 1.
Treasury Secretary Ukur Yatani is also seeking to triple capital-gains tax to 15%. The government targets an additional 50.4 billion shillings from the tax measures contained in the bill, according to Yatani.
Foreign technology companies offering services in Kenya, including Alphabet Inc’s Google, Netflix Inc. and Multichoice Group, didn’t immediately respond to requests for comment.
Other key tax proposals:
- The Treasury proposed a 10% increase in excise tax levied on fruit juices, bottled water, alcoholic drinks, cigarettes, motorcycles. It also wants to increase excise duty on cosmetics, beauty products and jewelry to 15% from 10%.
- The government wants any multinational with a gross turnover of at least 95 billion shillings to file a report with the Kenya Revenue Authority on its financial activities in Kenya and other jurisdictions.
- The Treasury proposes that a party dissatisfied with a decision of Kenya’s tax tribunal shall be required to deposit 50% of the disputed tax amount in a special account at the Central Bank of Kenya.
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