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Cab firms avoid tax under foreign laws

By Macharia Kamau | December 6th 2019 at 12:00:00 GMT +0300

Global companies that own cab-hailing platforms have been resisting paying taxes locally and have used international laws to ward off attempts by the Kenya Revenue Authority (KRA) to audit them.

The taxman said the companies have cited privacy laws in other jurisdictions where they are registered to deny it a view of the transactions that are undertaken in Kenya on their platforms. 

This has resulted in the firms not paying taxes that amount to tens of millions of shillings. An audit by KRA on transactions of one of the companies revealed that it owes Sh34 million in taxes.

According to KRA, the cab-hailing companies as well as the drivers using their platforms are currently not paying the full range of taxes due.

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Among them are withholding taxes that cab drivers should retain from commissions to the companies and remit to KRA as well as income tax by drivers from fares that customers pay.

The firms include Uber, Little and Bolt.

“The main challenge in taxing cab applications is that of enforcement since tax on commissions paid to non-residents is collected through the withholding tax regime, which requires partner drivers to withhold the tax as they pay commissions,” said KRA in recent submissions to the Senate Committee on Labour and Social welfare.

“In addition, enforcement of tax on the income of the partner drivers is also a challenge due to lack of information on the drivers.”

Obtaining information from the ‘local presence’ of the digital hailing applications has also proved challenging, said KRA.

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“For instance, it has been difficult to obtain data on payments made to Uber’s partner drivers or to Uber BV as they claim that the provision of data is subject to the applicable privacy laws, such as the Dutch Privacy Act and the European Union’s General Data Protection Regulation in the case of Uber BV.”

The submissions by KRA as well as other players are expected to inform efforts to regulate the taxi-hailing industry, with the National Transport and Safety Authority has already proposed regulations.

Other than an oversight on the business as a sub-sector in the transport industry, the regulations have made attempts to rope the players into the tax bracket and requires them to have tax compliance certificates before being licensed as operators.

KRA said the industry paid Sh239.9 million in taxes in the financial year to June 2019, more than three times the Sh74 million they paid in 2017.

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