OECD Urges Kenya to Drop Plan to Double Digital-Services Tax.


The Organization for Economic Cooperation and Development said Kenya should join the global minimum-tax deal rather than pressing for unilateral measures in response to the country’s intentions to double its digital fee.

According to the Finance Bill 2022, the National Treasury of the East African country wants to raise its digital-services tax to 3% from 1.5 percent. If lawmakers approve the plan and the president signs it into law, the fee, which applies to foreign companies that provide online services in Kenya, will take effect.

“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.”

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 plan’s opponents have expressed concern about how the proposal will effect them.

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.

According to Yatani, 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.

Other key tax proposals included:

  • 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.

Google, Netflix, and Multichoice Group, among other foreign technology companies that offer services in Kenya, did not immediately reply to demands for comment.