Analysts: New taxes to have negative impact on digital transformation
The Tax Laws Amendment Act, 2024 assented to recently by President William Ruto has begun operation with most analysts and users arguing that the new levies would have remarkable impact on digital transformation in the country.
The changes in the Act included the Income Tax Act, Value Added Tax Act, Excise Duty Act, and the Miscellaneous Fees and Levies Act.
The new law will Kenyans pay more to use or access technology products and services.
Ken Oulo, an IT expert, said the new tax that started working immediately by the Kenya Revenue Authority (KRA) would have an impact on products and services like imported mobile phones and digital ride-hailing services.
Oulo says that one of the key areas where the new tax would have an impact include increasing the consumer price index. He adds that companies involved in the import will pass the tax burden to users.
Sospeter Gitau, an IT consultant, argues that the Tax Amendment Act, 2024, additional 16 per cent of VAT being levied on digital technology will negatively affect the international digital services at source. The 10 per cent excise duty will impact digital transformation and inclusion negatively, he said.
Gitau added the levies on digital technology on digital services tax / significant economic tax – targets foreign companies and businesses operating in Kenya. However, significant economic presence tax has been increased from 1.5 per cent to 3 per cent.
The implication of this means the new tax will raise the service fees of companies like WhatsApp, YouTube, LinkedIn, Netflix, Spotify, X, and Google apps. The increment of 10 per cent in excise duty on imported mobile phones into the country will also make the cost of communication to be expensive.
According to KRA, all imported mobile phones valued at about KSh258,500 will attract 10 per cent tax on the value. KRA announced in December 2024 that come January 1, 2025, all new and imported mobile devices would be integrated into its tax system.
According to a PwC report released yesterday, a 15 per cent tax on online advertisement of alcohol and betting products placed on social media, internet, betting, alcoholic beverages, gaming, lotteries, and prize competitions will automatically raise the cost of those products.
Crypto transactions, according to the new introduction, will attract a 3 per cent, an increment from the initial proposal of 1.5 per cent.
The government predicts to collect over KSh60 billion from crypto traders in 2025, up from KSh10 billion in 2024. Statista data had shown that Kenya cryptocurrency market was projected to hit Ksh5.2 billion (US$41.7 million) in 2024.
