African Tax Authorities Intensify Focus on Cryptocurrency Users to Capture Tax Revenue
Tax authorities in Kenya and South Africa are targeting cryptocurrency users to ensure tax compliance and capture revenue losses from unreported digital asset transactions. The Kenya Revenue Authority plans to implement a tracking system for crypto trades, while the South African Revenue Service is warning taxpayers of technological advancements that will help identify non-compliance. Both agencies aim to expand the tax base and reduce the burden on compliant taxpayers.
African tax authorities are increasingly focusing on cryptocurrency users as part of their strategies to uncover tax evaders who exploit the decentralized nature of digital assets. As cryptocurrencies gain traction on the continent, with significant growth in ownership and transaction volume, regulators are recognizing these digital currencies as a potential source of tax revenue. The Kenya Revenue Authority (KRA) is leading this charge, recently announcing plans to implement a digital tax system designed to track cryptocurrency transactions, which have previously evaded taxation due to their anonymous nature. According to KRA, despite the absence of regulation by the Central Bank of Kenya or the Capital Markets Authority, earnings from cryptocurrency are subject to taxation under Section 3 of the Income Tax Act. The lack of adequate systems for taxing these transactions has resulted in substantial revenue losses for the government. KRA estimates that from 2021 to 2022, cryptocurrency transactions in Kenya totaled approximately Sh2.4 trillion, accounting for nearly 20 percent of the nation’s Gross Domestic Product—yet none of this revenue was taxed. The number of cryptocurrency users in Kenya has surged by more than 187 percent since 2021, signifying a growing economy within the crypto sector that KRA aims to leverage to address its revenue shortfalls. Similarly, the South African Revenue Service (SARS) has initiated warnings to cryptocurrency holders regarding the necessity of declaring their assets on tax returns. SARS Commissioner Edward Kieswetter stated that the agency has improved its technology to better identify non-compliant taxpayers. With estimates suggesting that over 5.8 million South Africans own cryptocurrencies, the majority reportedly do not declare these assets, leading to significant revenue losses for the government. Mr. Kieswetter emphasized the critical role of technology in enhancing SARS’ efficiency in identifying tax evasion, stating, “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 push to regulate cryptocurrency taxation aims not only to increase compliance but also to alleviate the tax burden for those who adhere to their tax responsibilities.
The increasing prominence of cryptocurrencies in Africa has led tax authorities in countries such as Kenya and South Africa to pursue aggressive measures to ensure tax compliance among users. As these digital assets become more widely owned and traded, governments recognize the potential for significant untapped tax revenue. Initiatives being implemented by agencies like the Kenya Revenue Authority and the South African Revenue Service demonstrate a concerted effort to adapt tax systems to account for the unique challenges posed by cryptocurrency transactions.
In summary, tax authorities in Africa are intensifying their focus on cryptocurrency users in a bid to capture lost tax revenues. Initiatives by the Kenya Revenue Authority and South African Revenue Service highlight the growing recognition of cryptocurrencies as a viable source of tax income. As digital assets continue to proliferate, it is imperative for users to acknowledge their tax obligations to support societal welfare and the delivery of essential public services.
Original Source: www.theeastafrican.co.ke
