Kenya: Make digital giants pay their fair share of taxes

Zawya

3 days ago

The current international tax sys- tem on digital systems, inher- ited from the 20th century, taxes the factory, not the algorithm. It recognises warehouses, butignores clouds. As a result, the 10 largest platforms (Google, Apple, Meta, TikTok, etc.) generated more than $500bn in rev- enue in 2023, largely escaping taxation. In many developing countries, they pay a tiny fraction of what they should. Meanwhile, tax revenues are eroding, inequalities are widening, and states are losing their means of action.
The OECD Agreement, which was sup- posed to tax profits where the users are located and introduce a global minimum tax, has stalled. The US Congress blocked its ratification, and the new Trump ad- ministration buried it by withdrawing the US from the process. Taxation has become a foreign policy tool.
This legal vacuum encourages uni- lateral tax measures. Several countries are maintaining or considering their own digital taxes, in the absence of a multilat- eral framework. But the American pressure is formidable: India, a pioneer in this area, announced on 1 April that it was abandon- ing its tax on non-resident companies that earn digital advertising revenue from Indican businesses (2%, yielding €440m in 2022), under the threat of trade reprisals.
In Africa, the stakes are high. Accord- ing to the Economic Commission for Af- rica, the continent could lose up to 30% of its VAT revenue by 2030 if nothing is done. Tax administrations, such as that of Kenya, are struggling to trace the digital flows that pass through Amsterdam before disappearing into the Virgin Islands.
Governments are under pressure from their people, who are revolting because of the unbearable tax burden, as in the DRC or Kenya. Small taxpayers pay for everyone: how can it be justified that a farmer is taxed on his livestock income, while a multinational raking in millions is exempt?
But Africa is not standing by and doing nothing. Kenya introduced a 1.5% tax on the turnover of digital platforms, supple- mented by 16% digital VAT, for an accrual of $78m in 2023. Nigeria has introduced a similar tax framework. These simple and effective models protect local non-digital SMEs while restoring tax equity. These are not 'anti-GAMAM' (Google, Amazon, Meta, Apple, and Microsoft) taxes, but transitional, non-discriminatory measures pending a global agreement.
In Europe too, digital taxes have borne fruit, bringing in €350m for France, £430m for the UK. But they are now being tar- geted by Washington. In London, there is a parliamentary debate: should such taxation be maintained despite the threat of sanctions and perhaps bigger tariffs, when the country is planning large budget cuts by 2030?
Faced with this impasse, a new bal-ance is possible. In 2024, 110 countries supported a UN framework convention on taxation. Its objectives are to intro- duce a withholding tax on digital services, integrated into bilateral tax treaties; to guarantee egalitarian governance (one country, one vote); and to strengthen the capacity of Southern countries to trace and tax digital flows.
This dynamic could take shape in a North–South forum, backed by the UN, with three key missions: pooling good tax practices; coordinating transitional taxes to avoid a disorderly proliferation; and strengthening administrative and technological capacities, particularly with regard to the traceability of digital flows.
Pivotal role
Europe has a pivotal role to play. On the heels of American tariffs, it has announced the possibility of a tax on American digital services. This wake-up call is beneficial and could inspire many countries in the Global South if a coalition were to form. Europe must maintain diplomatic pressure on Washington to revive the multilateral agreement, while co-constructing an al- ternative with the emerging powers within the framework of this North-South forum.
This agile minilateralism – led by India, Brazil, Nigeria, South Africa and Europe (UK and EU) – could structure a post-Western, more balanced and more le- gitimate governance of digital technology.
Digital flows are still escaping the tax radar, but not the appetite of the giants. It is time to rewrite the rules of the game. Taxing digital technology does not mean holding back innovation: it means restor- ing fiscal justice, protecting states and reaffirming a fundamental principle – sovereignty is not negotiable. n
Abdelmalek Riad, an economist, is Vice- President of Asoria, a digital economy taxa- tion platform.
The 10 largest platforms (Google, Apple, Meta, etc.) generated over $500bn in revenue in 2023, but mostly escaped tax.
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By Abdelmalek Riad