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Kenya’s digital economy

Because the sector is so large and relatively easy to track, it’s been hit with a wave of tax hikes. Just last year, excise tax on mobile money transactions was raised by 200 bp. The applicable rate on voice, SMS and data services also rose by 500 bp, and this is in addition to the 16% VAT that’s already applied to these services. Most of these extra costs were passed on to consumers.
In essence, this is the classic golden goose problem: how high a tax rate, is too much, especially when over 50% of jobs in Kenya are estimated to be susceptible to being lost through automation? I spoke to one of the report’s authors, Casey Torgusson, earlier on. We started by exploring how this rising wave of taxes may constrain not just growth of eCommerce, but also the investments in and growth of the next wave of Kenyan tech startups.

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