Tax authorities in Kenya and South Africa are increasingly targeting cryptocurrency users to curb tax evasion amid rising digital currency adoption. The Kenya Revenue Authority plans to enhance tax monitoring systems, while the South African Revenue Service has issued warnings to crypto holders about compliance. Both nations aim to capture significant untaxed revenues to support public services.
Tax authorities across Africa have intensified their focus on cryptocurrency users in efforts to combat tax evasion linked to the anonymity and regulatory limitations associated with digital assets. Recognizing the increasing popularity of cryptocurrencies, these authorities view them as a potential avenue for enhancing tax revenues amid ongoing shortfalls in revenue collection. The Kenya Revenue Authority (KRA) is implementing measures to monitor cryptocurrency transactions, which have previously eluded taxation. This initiative comes as the KRA seeks to rectify revenue targets that have consistently gone unmet. The agency has announced a move to procure a digital tax system aimed at capturing crypto trade transactions, which operate outside traditional tax frameworks due to their inherent anonymity. Remarkably, KRA observed substantial figures from cryptocurrency transactions, estimating that between 2021 and 2022, Kenyans engaged in trades totaling 2.4 trillion Kenyan Shillings, or approximately 20% of the nation’s GDP, without any taxation applied. The tax authority asserts that earnings generated from this sector are taxable under the Income Tax Act, despite the lack of regulatory oversight from the Central Bank of Kenya (CBK) and the Capital Markets Authority (CMA). Since 2021, the number of cryptocurrency holders in Kenya has surged by over 187%, ballooning from 253,000 to approximately 729,200 users, as recorded by Statista. This increase signifies a growing financial ecosystem surrounding cryptocurrencies, prompting the KRA to explore the sector for revenue generation opportunities. Similarly, the South African Revenue Service (SARS) has taken proactive steps to encourage compliance among cryptocurrency holders. Last week, SARS officials warned that individuals failing to declare their cryptocurrency holdings in tax filings must begin doing so. SARS commissioner Edward Kieswetter disclosed that advancements in technology will augment the agency’s capacity to identify non-compliant taxpayers within the estimated 5.8 million South Africans who own cryptocurrencies, of whom a significant portion reportedly do not declare their profits. The SARS commissioner elaborated, “Technology has enhanced SARS’ ability to root out non-compliant taxpayers, and SARS will pursue all without fear, favour or prejudice.” The ongoing efforts to incorporate cryptocurrency taxation are intended to broaden the tax base, alleviating the financial burden on compliant taxpayers who currently sustain these financial responsibilities. Kieswetter further emphasized the inequity faced by honest taxpayers, stating, “Those who are evading their responsibility make the burden of compliance difficult for other taxpayers,” thereby impacting the government’s capacity to distribute essential social services. As these tax authorities sharpen their focus on cryptocurrency, it is clear that they aim to curtail non-compliance and enhance revenue streams to support vital public services across the continent.
The article examines the increasing scrutiny that tax authorities in Kenya and South Africa are imposing on cryptocurrency users in an effort to combat tax evasion. Both nations are experiencing a surge in cryptocurrency adoption, which has presented challenges to traditional revenue systems due to the unregulated nature of digital assets. As authorities seek to establish mechanisms to tax these transactions effectively, they underscore the importance of capturing this previously untaxed economic activity to bolster public funding and address compliance issues.
In summary, Kenya and South Africa are undertaking significant measures to regulate and tax cryptocurrency transactions amidst a rapidly growing digital economy. The focus on identifying and penalizing non-compliant taxpayers reflects an urgent need to expand tax bases and ensure equitable compliance among all citizens. These developments signify an important shift towards recognizing digital assets not only as financial instruments but also as taxable sources of revenue that can support essential public services.
Original Source: www.theeastafrican.co.ke
