Kenya could soon have stronger powers to tax multinational companies earning money from its economy if a new global tax agreement being negotiated at the United Nations is approved.
The proposed changes are expected to give countries where businesses operate and generate income a greater share of tax revenues, reducing the ability of multinational firms to shift profits to other jurisdictions.
The negotiations, currently underway in New York under the United Nations Framework Convention on International Tax Cooperation, are seeking to reshape international tax rules by giving member states a greater role in deciding how multinational companies are taxed.
The proposals are aimed at ensuring countries benefit more fairly from economic activity taking place within their borders.
For Kenya, the outcome could strengthen recent efforts to tax the fast-growing digital economy. The country has already rolled out measures such as the Significant Economic Presence (SEP) Tax, which replaced the Digital Service Tax, alongside Value Added Tax charged on digital services supplied by foreign companies.
If the framework is adopted, Kenya would be in a stronger position to collect taxes from multinational digital companies including Google, Meta, Amazon, Netflix and cloud computing providers whose products and services are widely used by individuals and businesses across the country.
Speaking during a media briefing ahead of the fifth session of the negotiations, Tax Justice Network Africa executive director Chenai Mukumba said the discussions carry far-reaching implications for African countries.
“For Kenya and other African countries, what’s at stake is not merely a reform of international tax rules, but an important step towards finally completing the journey from political independence to genuine economic sovereignty,” she said.
The fifth round of negotiations is also expected to shape how countries tax multinational companies with regional headquarters, mining investments and other businesses operating across several countries. T
he proposals seek to give taxing rights to countries where goods and services are produced or consumed instead of where companies choose to record their profits.
The discussions have also brought renewed attention to Kenya's investment incentives, including tax holidays available in Special Economic Zones, Export Processing Zones, Konza Technopolis and incentives granted to investors in sectors such as manufacturing and data centres.
Delegates are also considering a proposal that would require multinational companies to publish country-by-country information showing the revenue they earn, profits they report, taxes they pay, the number of employees they have and the value of assets held in every market where they operate.
Supporters believe the reporting requirements would make it easier for tax authorities to identify profit shifting and ensure multinational companies pay taxes in the countries where they generate their income rather than where they report their profits.