The International Tax System is evil even if Google supports it
The Government of Kenya intends to implement a tax system that will require multinationals like Google, Amazon, Facebook, Netflix, and even small and medium digital oriented local businesses to pay both Income Tax and VAT to the Government. This move has brought a lot of discussion with confusion, with many Kenyans thinking that the tax the government intends to levy on these digital players will mean taxing the end user to consume free online content. That a tax system similar to the one Uganda imposed on her citizens for the consumption of social media is what the government of Kenya wants to implement for YouTube, Facebook and Blog sites. Far from it, what the Government wants to achieve is for companies like Google to pay income tax from money they make in Kenya.
For example, Google could be making something like shs 10 billion each year from Kenyans. These are Kenyans who buy and pay for the various advertisements across the numerous Google owned platforms. From the shs 10 billion, Google could be making a cool shs 3 billion in gross profits from Kenya. If Google were a local company, then it ought to pay the Government 30% of the shs 3 billion as income tax. However, because Google is not a Kenyan company, it pays the tax to the US Government – tax on the money it made from Kenyans. Isn’t this direct robbery? How then is Kenya as a country benefiting from Google’s presence in Kenya? The same argument can be made for Netflix, Amazon, Facebook, Uber, Twitter and any other multinational company that operates online.
The move by the Government to rectify the situation has however been negatively received by Google, who is now warning Kenya that the country is likely to receive international trade sanctions should the government go ahead with the Finance Act 2019. “The risk with this is as we see happening in France after its decision to impose a unilateral tax on international firms on digital platforms ,” said Michael Murugi, Google public policy and government relations leader. The reason behind the threats of sanctions, according to Mr. Murugi, is because of the International Tax System. That the International Tax System requires for for companies to pay tax in the countries they were founded (or where products were developed) but not where the company’s products/services are being consumed. To me, this is a very stupid tax system. How then can countries that are largely consumption oriented make money from the money spent by her citizens?
