Kenya and South Africa are intensifying efforts to tax cryptocurrency users, recognizing the potential revenue loss from unaccounted transactions. The Kenya Revenue Authority intends to implement a digital tax system aimed at capturing previously untaxed crypto exchanges, while the South Africa Revenue Service warns users to declare holdings as it enhances tracking capabilities. These measures aim to reduce tax evasion and ensure fairness among compliant taxpayers.
Tax authorities in Kenya and South Africa are intensifying their focus on cryptocurrency users as part of a broader initiative to identify tax evaders leveraging the often anonymous nature of these digital assets. With the emergence and proliferation of cryptocurrency ownership across Africa, these tax agencies are recognizing the potential for significant tax revenue that has been previously untapped. In Kenya, the Kenya Revenue Authority (KRA) is preparing to enhance its digital tax systems to encompass cryptocurrency transactions, which have largely evaded taxation due to their anonymity. The KRA has emphasized that, despite the unregulated status of cryptocurrencies by the Central Bank of Kenya and the Capital Markets Authority, earnings generated from digital asset transactions are still subject to taxation under the Income Tax Act. According to KRA estimates, which indicate that Kenyans conducted approximately Sh2.4 trillion in cryptocurrency transactions between 2021 and 2022—accounting for nearly 20% of the country’s Gross Domestic Product—none of these transactions were previously taxed. Furthermore, cryptocurrency ownership in Kenya has surged by about 187 percent, growing from 253,000 users in 2021 to approximately 729,200 today. In South Africa, the South Africa Revenue Service (SARS) has also taken action, warning cryptocurrency holders to declare their holdings in tax returns. SARS Commissioner Edward Kieswetter stated that improvements in technology would aid the agency in tracking non-compliant taxpayers. He noted the considerable number of South Africans—approximately 5.8 million—who own cryptocurrencies, yet only a fraction include them in their tax filings. As stated by Mr. Kieswetter, “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.” The measures being implemented by both KRA and SARS are positioned to broaden the tax base and alleviate the financial burden on compliant taxpayers, as tax evasion negatively impacts the government’s capacity to provide essential social services and benefits. In summary, it is clear that as cryptocurrency gains traction in African nations, tax authorities are adapting their frameworks to capture potential revenue from this growing sector, ensuring compliance and equity among taxpayers within these jurisdictions.
In recent years, the usage and acceptance of cryptocurrency in Africa have increased dramatically, prompting tax authorities in various nations to reconsider their tax strategies pertaining to these digital assets. Cryptocurrencies present a unique challenge due to their decentralized and often anonymous nature, which complicates traditional tax collection methods. As countries like Kenya and South Africa look to improve their tax receipts and address revenue deficits, they are actively engaging with the burgeoning crypto sector to ensure that earnings are taxed appropriately. This shift not only aims to generate additional revenue but also seeks to encourage compliance among taxpayers to enhance the overall fiscal health of these nations.
The focus of Kenya and South Africa’s tax authorities on cryptocurrency users marks a significant shift in the approach toward digital assets. By implementing enhanced systems to track crypto transactions and clarify the tax obligations of cryptocurrency owners, these nations seek to close the existing tax gap and ensure equitable contributions from all taxpayers. The potential revenue generated from taxing this growing sector could provide critical support for social services and public resources, underscoring the importance of compliance in maintaining fiscal stability and social equity.
Original Source: www.theeastafrican.co.ke
