The impact of indirect taxes on internet in East Africa.

Impact of indirect taxes on the internet in East Africa.

In the recent past, there has been a trend of countries focusing more on indirect taxes since they are easy to collect and broad-based. Hungary, though perceived as a lower tax jurisdiction due to the low corporate tax of 8%, has the highest VAT rate at 27%s. 

East African countries have used indirect taxes to collect revenue on the rapidly growing digital sector. As it stands Kenya is one of the highest-taxed countries with regards to internet access. 

In Kenya the recent Finance Act, 2021 increased excise tax on internet from 15% to 20% means that for every Kenyan accessing the internet, one pays a whooping 36% as taxes which is inclusive of VAT at 16%. For every Kshs. 1,000 spent on internet Kshs.360 goes to the taxman.

In Tanzania, Excise tax on internet is 17%, added together with VAT of 18%. Tanzanians pay 35% of the internet payment to TRA. Simplified this means for every Tshs 1,000 (Buku) spent on internet Tshs. 350 goes to the revenue authority. 

In Uganda excise tax of 12% on internet was introduced this year after scrapping off Over the Top Tax. This implies Ugandans now pay a total of 30% taxes on internet inclusive of VAT at 18% on internet access. Broken down further, for every Ushs. 1,000 on internet Ushs. 300 goes to the government.

Despite Kenya being the most taxed country in terms of internet access, it has been leading in internet usage in East Africa according to research done by Statista. This could be as a result of the rapid growth in e-commerce and social media usage in Kenya compared to Uganda and Tanzania.

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