Kenya maintains resistance to global tax plan

Kenya continues to stand unbowed in resisting a move to join the global inclusive taxation framework (IF).

In a note detailing the case study of Kenya’s engagement in the inclusive framework, the Kenya Revenue Authority (KRA) has retained irreducible minimums which it lists as preconditions to joining the framework.

The pre-conditions include the reduction of the revenue threshold placed on multinationals to be taxed under the scheme to Ksh.31.2 billion (250 million Euro).

At the same time, KRA wants developing countries like Kenya to retain taxing rights under the digital services tax (DST) and allow for a non-binding arbitration process on tax disputes.

Further proposals by Kenya cover the establishment of minimum taxes on royalties and the exclusion of financial institutions and extractive industries from the global tax plan fronted by the Organisation for Economic Co-operation and Development (OECD).

“Kenya is among developing countries pursuing discussions aimed at fine tuning the various aspects of the two-pillar solution of the inclusive framework and shall continue to engage that the tax issues are properly addressed,” KRA stated in the Case Study note published last Friday.

“The country remains committed to international cooperation in taxation matters - a key part of the country’s tax diplomacy profile over the years. Continuous stakeholder engagement will remain part and parcel of this endeavour.”

The inclusive framework covers two pillars in the taxation of the digital economy where the first part of the framework covers the re-allocation of residual profits by the most profitable multinationals to market jurisdictions where users of goods and services originate.

The second part of the framework proposes a blanket 15 per cent minimum tax to counter the artificial shifting of profits.

Kenya wants the threshold of revenues by firms covered in the re-allocation of residual profits to be reduced to cover more firms while raising the rate of minimum tax to 20 per cent.

Nigeria, Indonesia and Pakistan have joined Kenya in opposing the taxation framework.