More East African countries introduce digital transaction tax

January 22, 2021

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Declining private sector activities, shrinking public coffers, growing public debt and increasing expenditure pressures are forcing many African countries to look for new avenues for taxation.
Kenya, has joined the league of Tanzania and Uganda and started taxing digital transactions to support its depleting revenues.

Declining private sector activities, shrinking public coffers, growing public debt and increasing expenditure pressures are forcing many African countries to look for new avenues for taxation. Kenya, has joined the league of Tanzania and Uganda and started taxing digital transactions to support its depleting revenues.

However, the new tax burden according to sources has added more pain to households and businesses. This comes over and above the National Treasury’s decision at the beginning of the year to withdraw tax relief measures. Through the Finance Act 2020, the Digital Service Tax (DST) was introduced from January 1.

The new tax has imposed a 1.5 percent tax on gross income derived from all services offered through the digital marketplace. These will include 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.

Uganda introduced a digital service tax in May 2018 to broaden the country’s tax base. From July 2018, internet users in Uganda seeking to access social media sites were required to pay the daily duty tax of Ush200 ($0.05).According to reports, more than 60 online platforms including Facebook, WhatsApp and Twitter were impacted by the tax in Uganda. Between March and September 2018, Uganda lost nearly 30 percent of internet users.

Tanzanian government introduced the Electronic and Postal Communications (Online Content) Regulations, 2018. The new law required bloggers and online radio and television services to pay an annual fee of up to $900.The new law also introduced a license fee for content publishers (blogs, podcasts, videos) of Tsh100,000 ($43), an initial license fee of Tsh1 million ($429) and an annual license fee of Tsh1 million ($429).