Kenya will start levying new tax on digital markets under a new law signed by the president early in November. The Finance Act seeks to broaden the Income Tax Act net to include income accruing through a digital market place. The law defines the digital marketplace as a platform that enables direct interactions between buyers and sellers of goods and services through electronic means. In addition, a similar change has been made to the VAT Act making digital market services subject to value-added tax.
It’s not clear yet who will be affected – or how the tax will be imposed. The treasury still has to issue new guidelines on how the tax will be implemented. But it appears that potential targets include online taxi-hailing platforms. If experiences elsewhere are anything to go by, Kenya’s move to tax online commerce could put it on a collision path with Western governments and multinationals. One of the market leaders – Uber – has already warned the government that such a move could result in trade wars and retaliatory tax actions by the US.