Kenya has joined Tanzania and Uganda in taxing digital transactions to support its depleted public coffers in an economy weighed down by slowing private sector activities, shrinking revenue collections, growing public debt and increasing expenditure pressures.

The new tax has added more financial pain to households and businesses that started the year with tax relief measures rescinded by the National Treasury.

The Digital Service Tax (DST) was introduced by the Cabinet Secretary for the National Treasury Ukur Yatani through the Finance Act 2020.

“With the fast advancement in technology, many business transactions are increasingly being carried out through digital platforms. In some cases, due to the nature of the transactions, it is difficult to effectively tax the income derived through such platforms,” Mr Yatani said though the Budget statement for the 2020/2021 fiscal year.

“It is therefore necessary to provide a framework that will facilitate taxation of such income. In this regard, I propose to introduce digital service tax on the value of transactions at the rate of 1.5 percent.”

The new tax has imposed a 1.5 percent tax on gross income derived from all services offered through the digital marketplace including downloadable digital content such as mobile apps, e-books and films, and over-the-top services that include streaming television shows, films, music, podcasts and any other digital content.