Tax authorities in Kenya and South Africa are targeting cryptocurrency users to enhance tax revenue collection as the popularity of digital assets grows. The Kenya Revenue Authority plans to implement a new tax system to track crypto transactions, while the South African Revenue Service has warned cryptocurrency holders to declare their assets due to improved tracking technologies.
Tax authorities across Africa are intensifying their scrutiny of cryptocurrency users as part of a broader initiative to identify tax evaders who exploit the decentralized and unregulated nature of digital assets. The increasing popularity of cryptocurrencies has prompted various governments to assess the potential tax revenue these transactions could generate. In Kenya, the Kenya Revenue Authority (KRA) has recognized the need to incorporate digital assets into its tax framework following persistent failures to achieve revenue targets. This week, KRA announced plans to implement a new digital tax system aimed at tracking cryptocurrency exchanges, which have largely escaped taxation due to their intrinsic anonymity. The KRA has emphasized that while cryptocurrency is currently unregulated by the Central Bank of Kenya and the Capital Markets Authority, earnings derived from these transactions are subject to taxation under Section 3 of the Income Tax Act. According to KRA estimates, between 2021 and 2022, Kenyans engaged in cryptocurrency transactions worth Sh2.4 trillion, equating to approximately 20 percent of the nation’s Gross Domestic Product, without incurring any tax liabilities. Data from Statista indicates that the number of cryptocurrency users in Kenya surged by over 187 percent since 2021, rising from 253,000 to approximately 729,200. With this growth, the KRA aims to capture the additional revenue, responding to the need to fill budgetary gaps. Similarly, authorities in South Africa are taking measures against unreported cryptocurrency holdings. The South African Revenue Service (SARS) has recently alerted cryptocurrency holders to declare their assets, citing enhancements to their technological capabilities that will enable improved tracking of digital asset transactions. SARS Commissioner Edward Kieswetter revealed that while an estimated 5.8 million South Africans possess cryptocurrencies, very few disclose these assets in their tax returns, leading to significant tax evasion.
As cryptocurrency becomes more widely adopted on the African continent, the ability for users to remain anonymous in their transactions poses a challenge for tax authorities. Both Kenya and South Africa have reported substantial growth in the number of cryptocurrency participants, leading to increased recognition of digital assets as potential sources of untapped tax revenue. The lack of regulations and oversight has complicated the ability of tax agencies to enforce compliance and collect due taxes, prompting a reevaluation of current systems.
In summary, the tax authorities in Kenya and South Africa are intensifying their efforts to regulate cryptocurrency transactions and capture tax revenues that have previously gone unreported. Both KRA and SARS are implementing new technologies and strategies to ensure compliance, as the growth in cryptocurrency ownership continues to outpace existing regulatory frameworks. This initiative is crucial not only for improving revenue collection but also for maintaining fairness among compliant taxpayers who bear the burden of supporting public welfare initiatives.
Original Source: www.zawya.com
