NAIROBI, 21 January 2021 – Kenya has joined its neighbors Uganda and Tanzania in taxing digital transactions under a Ditigal Service Tax which came into effect on New Year Day.
Kenya now charges a 1.5 percent tax on gross income derived from all services on the nation’s digital marketplace.
The transactions that will be taxed include downloadable content like mobile apps, e-books and films.
The tax will also apply to transactions done in exchange for content like podcasts, online radio and television streaming, music and any other content.
Kenya’s Cabinet Secretary for the National Treasury, Ukur Yarani, did not provide a projection of how much money Kenya hopes to raise from the tax.
Kenyan citizens, households and companies say the new tax adds to their financial pain at a time when their household income and businesses are badly hit by the new coronavirus pandemic.
At the beginning of the year, Kenya’s Treasury rescinded tax relief measures it had provided to businesses to cushion the impact of COVID-19.
Kenya is learning from its neighbors.
Uganda imposed a digital tax in May 2018, claiming, in part, that will prevent gossip and broaden the country’s tax base.
Since July 2018, Ugandans seeking to access social media sites are made to pay a daily duty tax of $0.05 (200 Ugandan shillings).
A study by the human rights group, Future Challenge e.V, found that 60 online platforms, including Facebook, WhatsApp and Twitter were impacted.
The introduction of the digital tax led to a nearly 30 percent fall in Internet users between March and September 2018.
As a result of the fall in digital traffic, Future Challenges e.V said Uganda was hit with a shortfall in the social media tax it had estimated to bring in a total of $63 million in 2019.
Claiming that it needed to curb hate speech and fake news, the Tanzanian government slipped the digital tax into its Electronic and Postal Communication Regulations.
The tax for bloggers and online radio and television services requires such users in Tanzania to pay an annual fee of up to $900.
Publishers of online content (blogs, video, podcasts) are required to apply for a license at a fee of about $43.
They also have to pay an initial license fee of about $429 and an annual license fee of about $429.
Authorities in Tanzania can revoke the license of sites that publish content seen by the government as encouraging or inciting crimes.
The governments of the three east African countries have seen a drastic drop in their revenue collection and are desperate for funds to settle their domestic debts and service their international obligations.