Taxing digital firms tall order for Kenya : The Standard

Kenya and other countries in Africa will continue experiencing difficulties in taxing the growing number of multinationals operating in their jurisdictions. This as the rich countries push for the adoption of tax measures that have been criticised for ignoring the concerns of developing nations.  These include the emerging digital businesses that are now enjoying immense success in developing markets. The rich nations, which form the bulk of member countries in the Organisation for Economic Co-operation and Development (OECD), want tax rules changed in their favour, according to the Tax Justice Network Africa (TJNA). The proposals, which aim to prevent double taxation on major companies by allocating taxing rights to countries they operate in as well as those they originate from, are expected to steer negotiations on taxing multinationals over the next five months and lead a consensus by mid-2020. Tax avoidance TJNA said the proposals by OECD have locked out developing countries (under the grouping of G24 countries) from having an input in reforming international tax systems.

For More of This and Other Stories, Grab Your Copy of the Standard Newspaper.   Subscribe Now »

This could give a window to them to continue exploiting existing tax avoidance loopholes. Developing countries are estimated to be losing up to Sh10 trillion ($100 billion) annually in tax avoidance mechanisms by multinationals. “The G24 proposal, championed by developing countries within the OECD Inclusive Framework, is now effectively off the table,” said TJNA in a report last week. “The OECD Secretariat’s proposal unfortunately ignored the central elements of the G24 proposal and has been criticised for the reform likely to benefit OECD countries at the cost of developing countries’ interests.” Although they have been side-lined in formulation of international tax policies by OECD countries, the developing countries stand accused of a lacklustre push. TJNA Executive Director Alvin Mosioma noted that they have not exhibited aggression. “One of the loopholes is the digital companies registering their intellectual property in jurisdictions where they do not pay taxes or pay minimal tax,” he said.

Do not miss out on the latest news. Join the Standard Digital Telegram channel HERE.

Related Topics

Digital businessesTaxationTax Justice Network AfricaEconomic Co-operation and Development