The excise duty on mobile airtime and data charges has been raised to 20 per cent from 15 per cent in the new Finance Bill.

Kenyans will soon begin paying extra for airtime and mobile money transfer costs under the new taxes suggested by the country's Treasury.

The plans are included in the 2024 Finance Bill, as the government aims to raise an additional $2.5 billion (Sh323bn) in taxes in the financial year beginning in July.

The tax on mobile airtime and data rates has been increased to 20% from 15% in the new Finance Bill.

The Bill also seeks to increase the excise duty on mobile money transfer fees and cash transactions in banks, money transfer firms, and other financial service providers to 20% from 15%.

This means that telcos will now be obliged to increase transfer and withdrawal fees to cover the higher tax burden imposed by the government.

The move now forces Kenyans who earn money through digital marketplaces including as taxi hailing and food delivery to pay a 1.5 percent digital service tax.

Foreign companies such as Amazon, Alibaba, and Netflix who sell goods and services on a digital platform but do not have a physical presence in Kenya will now be required to pay the Economic Significant Presence Tax, which is calculated at 20% of their gross income.

The law defined "digital marketplace supply" as any supply of a service produced through a platform that allows purchasers and sellers of services to communicate directly via electronic means.

It covers a wide range of taxable services, from downloadable digital content to subscription-based media.

The government expects that these plans will help it meet its income targets, which have been falling short.

However, these high fees, particularly on mobile transactions, could jeopardise Kenya's emergence as a digital hub. Due to the hefty taxation, several small businesses in the country are apparently switching to cash instead of mobile money payments.