This archive report was first published on 16 August 2019.
Kenya's tax environment has been evolving rapidly, with the Kenya Revenue Authority (KRA) seeking to increase revenue collection to KSh6.1 trillion by June 2021.
Published on June 13th, 2019, the Finance Bill 2019 proposes several changes to taxation, including a 10% excise duty on betting activities and a 15% increase in excise duty rates on tobacco products, wines, and spirits.
Mobile app developers are also facing new tax implications, as the KRA proposes introducing taxes on digital applications to tap into revenue generated from downloads and usage. This affects both resident and foreign-based app developers conducting business in Kenya.
However, a report by the Africa Growth Initiative at Brookings, titled 'Taxing mobile phone transactions in Africa: Lessons from Kenya,' suggests that taxing mobile phone airtime and financial transactions may not significantly expand the tax base, but rather may reverse the gains on retail electronic payments and financial inclusion. This could lead low-income individuals to revert to using cash as the tax burden increases.
Kenya has a history of introducing and revising taxes on mobile phone services, dating back to 2003 when the government first introduced an excise tax on airtime. The tax on mobile phones was later introduced, along with taxes on computer hardware and software. In 2009, the government exempted mobile handsets from Value Added Tax (VAT), only to reintroduce it in 2013. Currently, the excise tax on airtime stands at 15%, while internet data services and money transfer services attract 15% and 20% tax, respectively. According to the report, mobile money-related taxes contribute less than 1% of Kenya's total tax revenue.
