Tax authorities in Kenya and South Africa are intensifying efforts to track and tax cryptocurrency transactions. The Kenya Revenue Authority plans to implement a new digital tax system, while the South African Revenue Service is enhancing technology to ensure compliance among crypto holders. This focus comes as both countries strive to meet revenue targets and close gaps caused by tax evasion.
In an effort to enhance tax revenues, African tax authorities are increasingly focusing their attention on cryptocurrency users, who have long benefited from the decentralized and unregulated nature of digital assets. As the use of cryptocurrencies expands across the continent, taxation agencies are recognizing the potential for significant revenue from these transactions, particularly in Kenya and South Africa. The Kenya Revenue Authority (KRA) has announced plans to implement a digital tax system specifically designed to capture cryptocurrency trades, which have largely escaped taxation due to their inherent anonymity and lack of regulatory oversight. “Though the sector remains unregulated by reporting authorities, i.e. the Central Bank of Kenya and the Capital Markets Authority, the earnings from the sector are legally taxable as per Section 3 of the Income Tax Act,” stated KRA representatives. With an estimated Sh2.4 trillion transacted from cryptocurrency in the country between 2021 and 2022—approximately 20 percent of Kenya’s Gross Domestic Product—this move aims to address the significant revenue losses experienced by the government. Coinciding with these efforts, the South African Revenue Service (SARS) has also taken steps to ensure that cryptocurrency holders declare their digital assets on tax returns. SARS commissioner Edward Kieswetter noted that the agency has upgraded its technology to track down non-compliant taxpayers. The agency estimates that about 5.8 million South Africans own cryptocurrencies, yet only a fraction has reported these assets for taxation. “Let all know that technology has enhanced SARS’ ability to root out non-compliant taxpayers, and SARS will pursue all without fear, favour or prejudice,” Mr. Kieswetter emphasized. By targeting cryptocurrency transactions, both KRA and SARS seek to expand the tax base, alleviating the burden on compliant taxpayers. This initiative is particularly significant in light of the negative impact that tax evasion has on government capabilities to deliver social support and welfare programs to vulnerable populations: “Those who are evading their responsibility make the burden of compliance difficult for other taxpayers. This is not only unfair to honest taxpayers but also affects the vulnerable in society disproportionately,” Mr. Kieswetter concluded.
The rapid growth of cryptocurrency usage in Africa has drawn the attention of tax authorities, particularly in Kenya and South Africa. Both countries have experienced a surge in cryptocurrency ownership, with Kenya showing a growth rate of over 187% in users since 2021. This boom coincides with ongoing challenges in meeting government revenue targets, prompting tax agencies to look into previously overlooked digital assets as a means to bolster tax intake. Despite a lack of comprehensive regulation surrounding cryptocurrencies, revenue collection remains legally defensible under existing tax laws, which has led both KRA and SARS to pursue greater accountability among crypto users.
In summary, the intensified scrutiny of cryptocurrency transactions by tax authorities in Kenya and South Africa marks a pivotal moment in the regulation of digital assets on the African continent. KRA and SARS are proactively implementing measures to capture tax revenue from a sector that has traditionally operated in the shadows. By doing so, both agencies aim to ensure equitable tax compliance, which underscores the importance of addressing the implications of emerging financial technologies for tax systems and the social fabric of their respective countries.
Original Source: www.theeastafrican.co.ke
