Kenya to boost government budget with cryptocurrency taxes

Kenya's government plans to introduce a 3% tax on digital assets for the upcoming fiscal year. The proposed legislation, set to be enacted on June 8, 2023, aims to bolster Kenya's depleted treasury through heightened tax measures.

Kenya's government is expanding its tax base following recommendations from external creditors. The proposed legislation includes a tax of 3% on digital assets but also encompasses other tax changes. These changes are extensive, ranging from excise duties on various goods and services to property taxes.

To put it in perspective, while the monetization of digital content will be subject to a 15% levy, the tax rate on the highest income bracket will be 35%. Kenyan cryptocurrency holders have received relatively moderate tax treatment compared to other sectors. 

A research note by the Nairobi-based law firm Anjarwalla & Khanna states that the proposed bill introduces "the most far-reaching changes that have been witnessed in tax legislation in the recent past." However, it's unlikely that the financial pressure will be reduced. By implementing measures to increase the tax burden, Kenyan authorities aim to generate a minimum of $21 billion for the country's treasury during the 2023/2024 financial year. 

It's worth noting that in mid-February, Kenya's Senate Standing Committee on Information, Communications, and Technology called on the Central Bank of Kenya to recognize digital currencies as legal forms of payment. Led by Senator Allan Chesang of the Zanzibar District, the committee shared its plans to involve various stakeholders in shaping policies related to virtual assets, service providers, and cryptocurrency usage in Kenya.

It's interesting to mention that Kenya's cryptocurrency community rallied behind President William Samoei arap Ruto during the 2022 elections. Many believed that Ruto's relatively young age (he was 20 years younger than his 77-year-old opponent, Raila Amolo Odinga) would be advantageous for driving the digitalization of the economy. 

President Ruto was perceived as more favorable towards cryptocurrencies, particularly in a country where concrete regulations were still in the works. However, recent initiatives to impose taxes on cryptocurrencies have gained President Ruto's full support.

Earlier, GNcrypto reported on the potential for cryptocurrencies to serve as a regional payment method in Africa.