Digital Economy Under Strain: Kenyan Content Creators Face Impact of New VAT Policy

Kenya’s digital content creators are feeling the squeeze as President William Ruto’s administration implements a new Value Added Tax (VAT) policy on digital services, threatening to undermine the very digital revolution the government has promised to foster.

Effective May 1st, 2025, the 16 percent VAT charge on digital services under Kenya’s VAT E-Invoicing and Digital Management System (EIDMS) Regulations has sent shockwaves through Kenya’s growing creator economy, raising questions about the government’s commitment to nurturing digital entrepreneurship.

Tools of the Trade Now More Expensive

For many Kenyan content creators, AI-powered platforms like OpenAI, Canva Pro, Adobe Firefly, Descript, and Runway ML have become essential tools that enable them to produce professional-quality content that can compete globally despite limited resources.

OpenAI has already notified its Kenyan users about the tax change, requiring them to provide Kenya Revenue Authority PIN numbers for proper documentation.

What might seem like a modest increase—from Sh3,170 to Sh3,680 annually for ChatGPT Plus—becomes substantially burdensome when creators must subscribe to multiple services.

“We have to come up with ways of creatively earning income for ourselves in ways that the older generation would never have thought of, only to be slapped with tax. From all the tax changes, ours is the craziest,” said Mohammed Alby, a popular creator with substantial followings across TikTok, Instagram, and YouTube.

Digital Hustle Already Challenging

The new VAT policy comes at a time when Kenyan creators already face significant hurdles. Equipment costs for cameras and laptops often exceed global averages, and reliable internet access remains expensive.

The additional tax burden could deter newcomers from entering the space, potentially stifling job creation in a sector that has provided economic opportunities for Kenya’s youth.

George T, an actor and digital creator, expressed frustration at the lack of institutional support: “It is not worth it when facilitation for creators to grow financially is not upheld. Most creators are a forgotten lot, and the taxes only create a strain.”

Broader Impact on Digital Economy

This latest tax measure follows the December 2024 replacement of the Digital Services Tax with a Significant Economic Presence tax, which imposes a three percent levy on gross turnover earned by non-resident digital service providers with substantial Kenyan user bases.

While these policies primarily target international technology firms, local users bear the consequences. According to a 2023 Kenya Private Sector Alliance report, over 1.2 million Kenyans—predominantly under 35—earn income through digital platforms.

For a generation that has embraced content creation as legitimate employment in a challenging job market, these additional costs raise a troubling question: Is the government building a digital economy or simply taxing it into extinction?

As one creator put it, in today’s “Gen Z content economy that moves at lightning speed,” AI tools are no longer luxuries but necessities for staying competitive. With each new tax burden, Kenya risks undermining its own digital revolution before it truly takes flight.​​​​​​​​​​​​​​​​