Kenya Is (Literally) Doubling Down On Digital Taxes Sparking Price Hikes

The Kenyan Treasury has proposed to increase digital tax service (DST) from the current 1.5 percent to 3 percent, per local reports. The Cabinet Secretary made this proposal through the Finance Bill of 2022, for the financial year starting this July. The tax is levied on the sale of e-books, movies, music, games, and other digital content and applies to foreign companies.

“The Third Schedule to the Income Tax Act is amended… by deleting the expression ‘one-point-five percent’ appearing in paragraph 12 (digital service tax rate) and substituting therefor the expression ‘three percent’,” recommends Treasury Cabinet secretary, Ukur Yatani.

Taxable supplies made through a digital platform include electronic services and downloadable digital content such as mobile apps, e-books, and movies. Others are subscription-based media like news, magazines, journals, music, podcasts and online gaming.

Popular digital content and service providers such as Google, Apple, Amazon, Jumia, Netflix and Showmax are affected. Payment platforms like Paypal are also included in the list.

The Kenya Revenue Authority (KRA) estimates foreign firms will generate KES 926 B (~USD 8 B) in gross revenue through Kenya’s digital marketplace. Business Daily reports the KRA is on track for KES 13.9 B (USD 120 M) in three years through June 2024 with the 1.5 percent tax.

Back in 2021 when the Digital Service Tax was signed into law,  Netflix increased the pricing for its Premium Plan. It is not unlikely that digital services dragged further into the tax net will respond once more by increasing their pricing if the new tax proposal is eventually set in stone.

Featured Image Courtesy: REUTERS/Regis Duvignau