Digital Taxation in Kenya

The goal of digital taxation is to ensure fair allocation and taxation
of profits where economic activities and value creation occur. This
includes transactions, services, and business models conducted
primarily online, such as e-commerce, digital advertising,
cloud services, streaming platforms, and monetization of user
data. With governments and revenue authorities wrestling
with how the digital economy affects their tax bases and tax
administration efficiency, digital taxation offers governments
new opportunities to boost tax revenues and create fiscal space.
Taxes on the digital economy can take a variety of forms. Some are
as simple as consumption taxes on internet purchases or service
subscriptions, while others that aim to assess profitability and
separate digital companies from other parts of the economy are
more complicated. Added to this are the presumptive taxes that
aim to capture revenue or turnover generated by digital service
providers. These digital tax measures can be broadly organised
into three main categories

The Kenyan government, through the now
withdrawn Finance Bill 2024, proposed to repeal
the Digital Service Tax (DST) that has been
criticized for violating principles of tax neutrality
and introduce a new tax called the Significant
Economic Presence Tax (SEP tax).This move came
amid growing pressure on Kenya to abandon its
unilateral digital tax measure and adopt a globally
negotiated unified solution.
The proposed introduction of the SEP tax was likely
a response to the ongoing negotiations at the
OECD level to develop a consensus-based solution
to the tax challenges of the digital economy.