Kenya hits tech giants with 1.5% digital tax

Kenya will impose a 1.5% digital tax on tech companies in an effort to squeeze more from online firms that do business and earn profits in the country.

Finance Minister Ukur Yattani announced the tax on the value of transactions in the budget statement for the financial year 2020/21. It is expected to come into force on 1 July.

Kenya joins the list of countries that have imposed tariffs on tech giants such as Google, Netflix, and Facebook.

The US is opposed to digital taxation saying it “unfairly targets” American technology companies. Last week, it launched a formal investigation into plans by 10 jurisdictions, including the UK, European Union and India, to increase the tax burden on American big tech companies.

The countries have imposed a digital services tax of between 2% and 15% and risk retaliatory tariffs from the US.

In the case of Kenya, its eligibility for duty-free exports to the US under the African Growth and Opportunity Act (Agoa) may be at risk.

Countries like France, however, say the tax will help prevent internet firms from diverting revenues through different jurisdictions with a view to reduce their taxes.