KRA holds talks over controversial global tax plan
The Kenya Revenue Authority (KRA) has held talks with the Organisation for Economic Cooperation and Development (OECD) over a controversial two-pronged global taxation policy.
The talks were conducted in meetings held between Monday and Wednesday this week and which brought together KRA’s Commissioner-General Githii Mburu and OECD Director-General for Tax Policy and Administration Pascal Saint-Amans.
OECD’s proposed global tax policy known as the inclusive framework (IF) seeks to ensure the fair distribution of profits by allowing countries the rights to individually tax the largest multinational enterprises.
On the flip side, the framework provides a global minimum corporate tax rate of 15 per cent even as the measure asks countries to suspend or withdraw measures such as the digital services tax (DST), a policy already in implementation locally.
137 out of 141 countries covered by the OECD framework have since agreed to the proposal besides Kenya, Nigeria, Pakistan and Sri Lanka.
“The meeting was a key step towards anticipating the possible benefits and concerns of the two-pillar international tax deal. The meeting also provided an opportunity to share the Kenyan experience of the Digital Service Tax. Kenya welcomed the technical discussions on all aspects of the deal and will consider its position,” KRA said in a statement on Wednesday.
The proposed framework which is to take effect from 2024 has drawn international uproar from civil society groups who largely see it as a loophole allowing deeper profit taking by global multinational cooperation’s (MNCs).
Oxfam International has for instance termed the deal as a mockery of fairness and expects its enactment to deny developing countries much-needed revenues for expenditures such as investments in education and health.
Locally, Nairobi based Tax Justice Network Africa (TJNA) has pushed back against Kenya’s participation in the initiative saying the proposed rate of minimum tax is too low and that it would only benefit developed economies.
Exemptions and grace periods under the framework have been seen as controversies which could be exploited by large behemoths such as Amazon.
The framework is premised on making large corporations pay more taxes in the countries they earn profits from.
Currently, multinationals with a presence in Kenya are subjected to a corporate tax at the rate of 30 per cent meaning its adoption of the OECD framework is likely to dwindle the country’s collections from the MNCs.
According to data from the OECD, developing countries are heavily reliant on corporation taxes with the nettings contributing to 19 per cent of overall revenue collections by African countries in 2018.