Advertisers hit as State eyes digital space with 20pc tax

Expansion of the tax to cover digital advertisements will hit both US tech giants and local digital ad agencies.

Photo credit: File | Fotosearch

Digital advertising companies, which include multinationals such as Facebook’s parent firm Meta and Google’s Alphabet, are set to take a hit after the government proposed a 20 percent excise duty on digital ads on alcoholic beverages, betting, gaming, lotteries, and prize competitions.

According to National Treasury Cabinet Secretary Njuguna Ndung’u, the decision follows the shift of advertisements on alcohol products, betting, and prize competitions to digital platforms following the introduction of a tax on the items on TVs, print media, billboards, and FM stations.

“This (tax) has resulted in a shift in the choice of advertisement platform from the traditional media to the internet and social media. To create a level playing field and to achieve the intended purpose, I propose to expand the scope of this tax to include fees charged on the internet and social media advertisement,” said the CS.

The introduction of the tax last year heavily hit media companies and advertising agencies, which have been reaping big from the rapid growth in gambling over the last decade, leading to multi-billion-shilling spending on advertisements.

Expansion of the tax to cover digital advertisements will hit not only US tech giants that currently dominate the local digital marketing space but also local digital ad agencies.

At the same time, the government has proposed to raise the current tax on gambling and alcohol advertisements on traditional media to 20 percent from the current 15 percent.

This comes at a time when the government has also proposed to raise the excise tax charged on betting, gaming, prize competitions, and lottery to 20 percent from the current 12.5 percent.

“The increase in excise duty on betting, gaming, prize competition, and lottery is aimed at curtailing the consumption of services that are considered detrimental to the citizens,” tax experts at audit firm KPMG said on Friday.

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