Finance Bill 2026: Why Gov't wants to impose 16% VAT on digital payments

An interesting clause has been the proposal to introduce 16% Value Added Tax (VAT) on Digital Payments

The Bill proposes to remove VAT exemptions on money dealings and financial services, by introducing a 16% VAT on digital payment processing, transfers, and merchant acquiring services.

In Simple Terms, this means that right now, when you move money or pay for things digitally, the processing fees charged by the technology companies are exempt from VAT. The government wants to remove this exemption and slap a 16% tax on those fees.

Who this targets:

This targets payment Service Providers (like companies that process online checkout pages, mobile money transfers, and point-of-sale card terminals).

So if a business or a provider pays a fee to process a digital transaction, that fee will now be 16% more expensive because of the VAT. 

Cost implications indicate that while the tax is levied on the financial providers, history shows these costs are almost always passed down to the consumer or the merchant, potentially making digital transactions and online shopping more costly.

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