Digital Economy Taxation and Sustainable Revenue Mobilisation in Kenya: A Systematic Review of Policy Design, Compliance Constraints and Global Tax Reforms

Abstract

This study examined the role of digital economy taxation in supporting sustainable revenue mobilisation in Kenya amid evolving global tax reforms. It evaluated the evolution from Digital Service Tax to Significant Economic Presence Tax and the influence of institutional capacity and compliance on digital economy taxation outcomes. The study employed a PRISMA-informed systematic literature review of publications from 2019 to 2026, identified through Google Scholar, SSRN, RePEc and relevant institutional sources. Using SPIDER model-informed eligibility criteria, 50 sources were retained from approximately 90 initially identified records and data were extracted using a standardised extraction matrix and subjected to thematic synthesis. The findings reveal fluctuations in standalone DST collections, which declined from Kshs 501 million in FY 2020/21 to Kshs 312 million in FY 2021/22 before increasing to Kshs 652 million in FY 2023/24. In contrast, aggregate revenue collections from broader digital economy taxation measures, including DST/SEP and VAT on digital marketplace supplies, increased from Kshs 5.328 billion in FY 2022/23 to Kshs 14.3 billion in FY 2024/25. The study concludes that taxpayer identification challenges, cross-border transaction monitoring & enforcement and institutional capacity constraints continue to undermine revenue potential. The study recommends that sustainable revenue mobilisation requires integrated digital tax instruments supported by robust compliance systems, technological capability, and aligned tax frameworks. Its originality lies in showing that sustainable revenue mobilisation depends on more than the mere existence of a tax instrument.