African tax authorities are targeting cryptocurrency users to combat tax evasion linked to the growing digital asset market. Kenya’s KRA plans a digital tax system to monitor crypto transactions, while South Africa’s SARS warns users to declare their holdings as technology improves tracking capabilities. Both agencies seek to increase tax compliance and plug revenue gaps.
Tax authorities in Kenya and South Africa are intensifying their focus on cryptocurrency users in an effort to tackle tax evasion linked to the anonymity and regulatory gaps surrounding digital assets. As cryptocurrency transactions gain traction across the African continent, revenue agencies are beginning to view these assets as a potential source of untapped tax revenue. In Kenya, the Kenya Revenue Authority (KRA) is planning to implement a new digital tax system designed to monitor crypto transactions which have previously evaded taxation due to their obscurity. The KRA has articulated that although the cryptocurrency sector remains largely unregulated by institutions such as the Central Bank of Kenya and the Capital Markets Authority, income generated from these transactions is still taxable under the Income Tax Act. The agency highlighted that a lack of infrastructure for taxation has contributed to significant revenue losses for the government. Between 2021 and 2022, an estimated Sh2.4 trillion worth of transactions occurred in the Kenyan crypto market, constituting about 20 percent of the nation’s Gross Domestic Product, with no tax obligations being fulfilled. The rise of cryptocurrency ownership in Kenya is notable, having surged by over 187 percent since 2021, potentially indicating greater financial activity within this sector. The KRA aims to bridge revenue gaps resulting from previously unmet targets, revitalizing interest in taxing these digital assets. Similarly, the South African Revenue Service (SARS) has issued warnings to cryptocurrency holders regarding the necessity to declare their assets on tax returns. SARS Commissioner Edward Kieswetter emphasized that advancements in technology enable the agency to identify non-compliant taxpayers efficiently. Although statistics estimate that approximately 5.8 million South Africans own cryptocurrencies, a significant proportion fail to report their earnings, thereby avoiding tax liabilities. “Let all know that technology has enhanced Sars’ ability to root out non-compliant taxpayers, and the Sars will pursue all without fear, favour or prejudice,” stated Commissioner Kieswetter.
The increasing prevalence of cryptocurrencies has raised concerns among tax authorities in Africa, as these assets provide opportunities for individuals to evade existing tax obligations. Regulatory frameworks regarding crypto assets have been limited, making it difficult for authorities to enforce tax compliance among users while also missing out on substantial revenue streams. The initiatives undertaken by tax agencies in Kenya and South Africa reflect a growing awareness and an effort to reclaim lost tax revenues through improved tracking and reporting systems. With growing participation in the cryptocurrency market alongside rising tax compliance requirements, these measures signal a significant shift in the regulatory environment regarding digital assets on the continent.
In conclusion, as the adoption of cryptocurrencies continues to rise across Africa, tax authorities in Kenya and South Africa are taking proactive measures to ensure compliance among crypto users. By leveraging technology, these agencies aim to identify and tax transactions that have evaded regulation thus far, addressing both revenue loss and equitable taxation amongst compliant citizens. The strategic focus on cryptocurrency not only underscores the potential for additional tax revenues but also reflects a broader trend towards enhanced regulation of digital assets in response to their growing popularity.
Original Source: www.zawya.com
