Crypto in Africa: South Africa wants to hike taxes on blockchain-related activities
Blockchain and cryptocurrency adoption in Africa is steadily increasing with new countries in the continent getting onboard. Countries like Uganda and Tanzania are slowly catching up with others, such as Nigeria, South Africa and Kenya.
Tanzanian gov’t looks to increase blockchain innovations
The Tanzanian government recently invited academics and researchers to help produce favorable blockchain regulations that will help grow the country and its economy.
According to reports, Tanzania is looking to increase blockchain usage in the country. While speaking at the second Annual ICT [Information and Communications Technology] Professionals Conference 2018 in Dar Es Salaam, Dr. Jim Yonazi, the Deputy Permanent Secretary Minister for Works, Transport, and Communications, reached out to experts and researchers in the industry to help think of new use cases for blockchain in the country in order to help formulate the necessary regulations.
Dr. Yonazi stated, “Although the government has a national blockchain committee, I also ask experts and universities to conduct thorough research on this technology to understand its potentials and challenges before we fully adopt it’s in the country.”
Tanzania’s stance on cryptocurrency has been somewhat optimistic. In December, the central bank in the country announced that it was taking measures to study the industry to create a legal framework. Despite having no clear legal structure on blockchain and its technologies, Tanzania still has time to join the wave on the blockchain.
Unlike neighboring countries Kenya and Uganda, the blockchain and cryptocurrency community in Tanzania has been entirely dormant. It also does not have a local cryptocurrency exchange and relies on services from international exchanges. Despite the slow growth, Tanzania received this past July a first of its kind blockchain technology that tracks aid and support to newly born babies and vulnerable women in the county.
Many hope the call to action will help increase blockchain innovations and cryptocurrency trade in the country.
South Africa proposes regulatory changes that could disrupt FinTech growth
Recently, the National Treasury and the South African Revenue Services (SARS) introduced some changes to the draft Taxation Laws Amendment Bill, which have caused significant concerns among people in the FinTech industry. The authorities suggested that cryptocurrency should be categorized as a financial instrument in the draft bill.
According to Robert Hare, a senior associate at the Bowmans law firm, the proposed “small changes” are not so small, but stand to change a lot in the cryptocurrency industry. The lawyer stated that if the change becomes law, it will prevent startups, companies and incubators in the county from claiming a significant income tax incentive, otherwise referred to as the research and development (R&D) allowance.
The R&D allowance is a longstanding tax incentive that was created to encourage various forms of innovation in South Africa. This includes the creation and development of computer programs of an innovative nature—which could otherwise include the development of new cryptocurrencies.
Hare further explained that classifying cryptocurrencies as financial instruments do not do proper justice to the skills and work put into developing the digital currencies. He said one cannot compare the work and efforts used to create digital money with works done to form a loan, a share or derivatives, among other things.
The advocate raises concerns regarding why the authorities chose to impose such changes without any explanations. However, authorities claim that classifying cryptocurrencies and financial instruments is meant to help clarify the existing provisions relating to cryptocurrency. Hare and many in the field believe this is a completely new reference and not a clarification.
The proposed change is yet to be implemented. Hare hopes these new changes will not stop inventors making South Africa a hub for FinTech innovation.
SARS began taxing cryptocurrencies earlier this year in April. The authority has been applying standard income tax rules to cryptocurrencies holders who are required to declare cryptocurrency gain and losses as part of their taxable income.
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