Tax Authorities in Kenya and South Africa Intensify Efforts to Regulate Cryptocurrency Taxation
Tax authorities in Africa are increasingly focusing on cryptocurrency users to combat tax evasion, with Kenya’s KRA and South Africa’s SARS implementing strategies to enhance compliance. KRA revealed plans to track crypto transactions through a new digital system, while SARS pledged to leverage technology in monitoring crypto holdings that are often unreported. Both agencies aim to widen their tax bases and generate significant revenue from the growing crypto economy.
Tax authorities in several African countries, including Kenya and South Africa, are intensifying their focus on cryptocurrency users as part of efforts to capture tax evaders exploiting the anonymous nature of digital currencies. With cryptocurrency transactions gaining traction across the continent, regulators are now recognizing these assets as a potential avenue for increasing tax revenues. In Kenya, the Kenya Revenue Authority (KRA) has acknowledged that the borderless aspects of cryptocurrency have allowed significant financial activities to occur without taxation. This week, KRA announced plans to implement a new digital tax system aimed at monitoring crypto transactions, which have remained largely untaxed due to their inherent anonymity. The KRA highlighted that income derived from these digital assets is legally taxable under Section 3 of the Income Tax Act. The lack of effective tax collection systems has reportedly resulted in considerable revenue losses for the Kenyan government. According to KRA’s estimates, cryptocurrency transactions from 2021 to 2022 reached Sh2.4 trillion, accounting for approximately 20 percent of the nation’s GDP, all of which went untaxed. Moreover, the number of cryptocurrency holders in Kenya surged by 187 percent from 253,000 in 2021 to an estimated 729,200 users today, thus increasing the potential tax revenue from this sector. Similarly, the South African Revenue Service (SARS) has also called upon cryptocurrency holders to declare their digital assets in tax returns, announcing an upgrade to its tracking technology to enhance compliance measures. SARS Commissioner Edward Kieswetter stated that approximately 5.8 million South Africans are believed to own cryptocurrencies, yet only a fraction report them in their tax filings. He emphasized the agency’s commitment to uncovering non-compliant taxpayers, indicating that the recent technological enhancements afford SARS an improved capability to monitor and enforce tax compliance. The move is aimed at broadening the tax base and alleviating the burden on compliant taxpayers, thus enabling the state to provide essential social services more effectively. In summary, both the KRA and SARS are taking significant steps to regulate the cryptocurrency landscape, seeking to address the longstanding issue of tax evasion in this rapidly growing market across Africa.
The increasing adoption of cryptocurrencies in Africa presents significant challenges and opportunities for tax authorities. The decentralized nature of crypto assets, combined with a lack of comprehensive regulatory frameworks, has made it difficult for governments to monitor and tax transactions effectively. As cryptocurrency usage continues to expand, tax agencies are compelled to consider new strategies to capture revenue that has historically eluded them. Kenya and South Africa stand out in this regard, as they recognize the need to innovate their tax systems to incorporate digital assets and ensure greater compliance among taxpayers.
In conclusion, it is evident that tax authorities in both Kenya and South Africa are actively targeting cryptocurrency users to enhance tax collection and address revenue shortfalls. The measures being put in place, including advanced tracking technologies and new taxation systems, aim to adapt to the evolving financial landscape shaped by digital currencies. By prioritizing compliance among crypto users, these authorities hope to create a fairer tax environment that alleviates the burden on responsible taxpayers and strengthens the financial integrity of the state.
Original Source: www.zawya.com
