Kenya’s anticipated Finance Bill 2025 brings into focus the proposal to impose a 16% VAT on streaming services. Consumers and producers of local content may be adversely affected by this law, and it is also a matter of concern for the digital economy. The government is trying to get a piece of the digital pie, but matters of affordability, innovation, and inclusivity are at the fore.
The 16% value-added tax is expected to hike online TV and radio subscription costs. As 76.5% of Kenyans, 16 years old and above, pay for some kind of digital content, this increase might be a good number of these consumers paying more. Such an increase may be an obstacle to the very affordable digital entertainment in these low-income and rural communities, which usually suffer a lot from a lack of reliable internet services.
According to GWI, Kenya stands fourth globally in consuming digital content. The tax, having a direct impact of 16% VAT on streaming, will aggravate the precarious financial state of some lower-income groups that may then consider giving up paying for services and start depending on unauthorised platforms for content.
Local streaming services and content creators are especially susceptible to the 16% VAT on streaming. Many rely on inexpensive models for pricing, whereby the tax may ask them to either increase prices or reduce content offerings, thereby stifling innovation. In the words of Kenya’s Communications Authority, internet TV is the new way for young audiences to consume media, and it is essential that local producers keep a competitive edge.
Kenya is rapidly becoming a digital economy, with mobile connections touching 68.8 million and internet subscribers at 27.4 million in early 2025. The 16% VAT on streaming may increase the operational costs for both local and foreign streaming services and discourage investments in that sector. The limitation of choice for consumers and a decrease in growth for the sector may be the end result.
Even the non-resident digital services are already levied at 3% SEP tax, which creates a double tax burden when coupled with the 16% VAT on streaming. Due to these added financial pressures, international companies may rethink their presence in Kenya.
Although revenue generation is considered important with the imposition of a seemingly blanket 16% VAT on streaming in the digital economy of Kenya, it could lead to colossal harm in the digital arena. The government could also consider targeted tax incentives to local content producers and digital start-ups so as to stimulate innovation and foster local platforms. Investments in internet infrastructure to improve access would serve to further extend the reach of the digital economy.
A tax system that existed with some great subtlety, and which encouraged local production, could go a long way in balancing the need for government revenue against the growth of the digital economy.
The suggested 16% VAT on streaming services may furnish a much-needed revenue stream, but the same cannot be said about its impact on consumers, local artists, and the digital economy. If any measure of digital growth is to be sustained, the government should weigh the outcomes of this tax with care. Therefore, Kenya’s digital future should be balanced with such elements that promote innovation, encourage local content generation, and facilitate internet access.
As Kenya’s digital footprint strengthens, the more strategic application of the said 16% VAT on streaming can help build a sustainable and inclusive digital economy in the long run.
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