The Kenyan government has announced a reduction in the Digital Services Tax (DST) from 3% to 1.5% as part of the Finance Bill 2025, aiming to alleviate the tax burden on digital entrepreneurs and enhance compliance.
Treasury Cabinet Secretary John Mbadi stated that the decision aligns with the recent reduction of the Turnover Tax, targeting small businesses. He noted the need for uniformity in the tax regime to ease the burden on digital entrepreneurs, many of whom operate small-scale businesses. “Digital tax will be reduced from 3 per cent to 1.5 per cent in the new budget. The argument from players in the digital space has been that they are largely small business people, hence the need for uniformity,” Mbadi explained.
Despite this reduction, many content creators argue that the measure falls short of addressing their broader concerns. They highlight the cumulative tax burden, including a 5% withholding tax on their earnings, which, combined with platform fees and other operational costs, significantly reduces their income. For instance, YouTube withholds 9% of revenue generated by content creators using AdSense, and the government’s additional 5% tax exacerbates the financial strain. Moreover, the high cost of internet and production expenses further challenges their sustainability.
Content creators are calling for more comprehensive support, including clearer tax guidelines, recognition of their unique business models, and investment in digital infrastructure. They emphasize the need for policies that not only tax but also nurture the digital economy, ensuring that creators can thrive and contribute meaningfully to Kenya’s growth.
As Kenya continues to position itself as a leader in Africa’s digital landscape, balancing revenue generation with the promotion of innovation and entrepreneurship remains a critical challenge. The government’s engagement with stakeholders and responsiveness to the evolving needs of the digital community will be pivotal in shaping a sustainable and inclusive digital economy.
