The Kenya Revenue Authority has declared its intension to go for those who advertise and sell their products on social media including Facebook, Instagram, Whatsapp, Twitter and Telegram in a bid to seal loopholes of tax evasion.
According to the agency, most of the online businesses are neither paying taxes nor filing annual returns. The trend, the tax collector warns, must change and the traders must file taxes that may include VAT, Excise Duty, Withholding Tax, PAYE, Corporate taxes and any other tax obligation required under the business they may be engaged in.
KRA has failed to hit its targets every other sunrise, falling short, according to the agency’s own reports, by nearly Sh528b, which is an equivalent of 6.6% of the country’s GDP, annually.In targeting online businesses, KRA says, they are also aiming at broadening the pool of their active payers from the current 3.94 million to 7 million active remitters by 2021.
The major concern for the taxman in their new bid, however, should be how they will get hold of the online businesses most of which do not have physical addresses. Online transactions are also done through private messages after which deliveries are done at the buyers’ convenience. This will make it really hard for KRA to track individuals and small businesses transacting online.
The taxman boasts of resources; human, monetary and surveillance technology that they could deploy to help them effect their newly acquired appetite. But it will take more than this for KRA to succeed here. They will have to, for example, start from definitions, which tech revolution has really convoluted. Buying and selling of a product or service is called business. If you have a shop for shoes and you are selling either in wholesale or retail, you are in business. Any products or services, which are buying or selling through any of the mediums of the Internet is online business.
But would selling off your single unit TV set that you have had for the last six years so as to upgrade in terms of size and specs via Facebook, at a throwaway price, qualify to be termed as business in the realm of KRA taxing the transaction? Yes, there’s a lot of business trending on social media but more often than not, one off disposal of chattels personal occupy much of that space. It behooves KRA to define boundaries of what they really want to go for on social media. If they do not do that, it will create avenue for extortion by their own officers and imposters and, disaster is what this entire endeavour will court.