DST should only apply to foreign companies

In Summary

• Since January 1, all purchases from digital marketplaces are subject to a 1.5 percent transaction tax by the KRA

• Globally, attempts to introduce digital taxes have mainly targeted giant offshore companies paying little tax locally

The KRA headquarters at the Times Tower
TAX BASE: The KRA headquarters at the Times Tower
Image: FILE

The new Digital Service Tax is not in the best interest of the Kenyan economy. It threatens to destroy the start-up economy of the Silicon Savannah.

The DST is calculated at 1.5 percent of all digital transactions in Kenya.

Similar taxes in Europe have targeted offshore corporations like Amazon and Google that pay virtually no tax locally. 

However DST in Kenya is likely to be paid primarily by local companies and not by international companies. Global entities like Amazon and Netflix will remain outside the reach of the Kenya Revenue Authority.

For digital start-ups, the DST may be the kiss of death as it will come on top of the 1.5 percent minimum turnover tax. Eventually those small start-ups will also need to pay VAT and corporation tax if they are successful.

More importantly, it will be a disincentive to creating a digital consumer economy in Kenya. It will now be 1.5 percent more expensive to buy a product online than to physically purchase it in a shop. That is a disincentive to our digital transformation.

The government should revise the DST so that it does not apply to local companies and applies only to foreign companies in Kenya.

Quote of the day: "It is better to offer no excuse than a bad one."

George Washington
The first President of the United States was sworn in on April 30, 1789