A few weeks ago, Bolt, a digital taxi company updated its terms and conditions for drivers that every driver must comply with for them to use the App. Curiosity drove me to read through the terms because I realized in the digital era, nobody really bothers to read the terms and conditions that apps demand we agree to before we install them. With the introduction of the digital tax in Kenya, I needed to know how these apps, being that they are digital companies handle the issue of taxation.
For those who don’t know about digital tax
Digital Service Tax (“DST”) was introduced in Kenya through the Finance Act, 2019, and enacted through the Finance Act, 2020 with an effective date of 1st January 2021. It was introduced to both the Income Tax Act (“ITA”) and the Value Added Tax Act (“VAT Act”).
Both Acts prescribe that DST shall be payable by a person whose income is earned in Kenya from the provision of services through a digital marketplace. Further, both the ITA and VAT Acts define a digital marketplace as “a platform that enables the direct interaction between buyers and sellers of goods and services through electronic means”.
According to the Kenya revenue authority agent we spoke to, this tax is payable by the company that is providing the services, hence drivers and partners may not be individually responsible for the payments.
Hidden under the “providing the transportation service” terms of the Bolt app terms is the tax obligations for the driver:
Section 4.15 states that. “Your tax obligations. You hereby acknowledge that you are obliged to fully comply with all tax obligations that arise to you from the applicable laws in relation to providing the Transportation Services, including (i) paying income tax, social security tax or any other tax applicable; and (ii) fulfilling all employee and tax registration obligations for calculations in regard to accounting and transfers to applicable State authorities as required by the applicable law.”
And to cap it, bolt continues to state that ” In case the Tax authority will submit a valid application to us to provide information regarding the activities of you, we may make available to the Tax authority the information regarding the activities of you to the extent set forth in valid legal acts. Additionally, it is your obligation to adhere to all applicable tax regulations that may apply in connection with the provision of Transportation Services.“
This means that the tax authority can at any time submit to the digital taxi company a request to access your record with them and get all the details of the drivers and partners including the earnings for a given duration of time to determine your tax obligations, and because most drivers and partners do not understand this, most would come under heavy penalties from the tax agency for undeclared income.
The sad thing is that most of these tax burdens are left on the shoulders of the drivers and partners after the digital taxi company deducts its commission which is approximately one-quarter of the earnings.
And with the coming in of Huduma number, this information will be so easy for the government to track any time of the day; oh, and if you use the Mpesa till number or Paybill number to collect your pay, it makes it even easier for the government to know every shilling that you have received.