African tax authorities, especially in Kenya and South Africa, are intensifying efforts to regulate cryptocurrency transactions and ensure tax compliance among users amid rising digital asset popularity. The Kenya Revenue Authority plans to implement a new digital tax system, while the South African Revenue Service is enhancing tracking technologies to identify non-compliant taxpayers. Both agencies aim to plug revenue gaps and ensure fair tax contributions amongst all taxpayers.
Tax authorities across Africa are increasing their scrutiny of cryptocurrency users in efforts to identify tax evaders who exploit the anonymous nature of digital assets. As the popularity of cryptocurrencies rises within the continent, tax agencies are recognizing the potential for additional revenue from this sector. The Kenya Revenue Authority (KRA) is taking significant steps in this direction. Recently, the authority announced plans to develop a new digital tax system aimed specifically at tracking cryptocurrency transactions, which have largely gone untaxed due to their regulatory evasiveness. The KRA has indicated that taxable earnings derived from cryptocurrency trading fall under the Income Tax Act, despite the current absence of a formal reporting framework from entities such as the Central Bank of Kenya and the Capital Markets Authority. The KRA has estimated that between 2021 and 2022, approximately Sh2.4 trillion (roughly 20% of Kenya’s Gross Domestic Product) was transacted via digital currencies without being subjected to taxes. Given the 187 percent rise in cryptocurrency ownership in Kenya since 2021, KRA is now motivated to fill this substantial revenue gap following a series of unmet revenue targets. Similarly, the South African Revenue Service (SARS) has also begun to focus on cryptocurrency owners, urging them to declare their digital assets or face potential repercussions. SARS Commissioner Edward Kieswetter stated that the agency has upgraded its technological capabilities to improve tracking of tax compliance among crypto holders. With an estimated 5.8 million South Africans owning cryptocurrencies, the commissioner noted that most of them fail to report their holdings in tax filings. Kieswetter emphasized the need for compliance, 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.” He further elaborated that tax evasion by a minority increases the financial burden on compliant taxpayers, thus negatively impacting society’s vulnerable groups, as it restricts the government’s ability to allocate resources for essential welfare programs.
The rise of cryptocurrency usage in Africa has prompted an urgent response from government tax authorities, particularly in nations like Kenya and South Africa. Cryptocurrency assets, owing to their decentralized and largely unregulated nature, pose challenges in taxation and revenue collection. As more citizens engage with digital currencies, tax agencies are recognizing a significant opportunity to enhance government revenue by formalizing guidelines and frameworks to tax these transactions. This scrutiny aligns with the global trend of increasing regulatory oversight in the cryptocurrency space due to rampant tax evasion concerns.
In conclusion, the tax authorities in both Kenya and South Africa are responding proactively to the growing prevalence of cryptocurrencies by implementing measures aimed at capturing tax revenue from previously unreported transactions. The KRA’s intention to deploy a new digital tax system and SARS’ commitment to utilize technological enhancements highlights the urgency of ensuring compliance among crypto users. Establishing these frameworks is crucial not only for increasing government income but also for alleviating the tax burden on compliant taxpayers.
Original Source: www.zawya.com
