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- National Treasury Cabinet Secretary clarified that the tax is directed at multinational companies, not local social media users
- Tax aims to ensure foreign corporations operating in Kenya contribute fairly to the economy
- Tax changes seek to broaden the definition of a 'digital marketplace' and include services such as ride-hailing and food delivery
National Treasury Cabinet Secretary John Mbadi has clarified the government’s stance on the proposed 15% tax on social media and digital businesses, stating that the levy is directed at multinational companies rather than Kenyans on social media.
Appearing before the National Assembly’s Finance Committee on November 14, 2024 Mbadi dismissed claims that the government was targeting local social media users, explaining that the tax aims to ensure foreign corporations operating in Kenya contribute fairly to the economy.
"The perception that we are invading the social media space is misplaced.We are simply asking global companies benefiting from Kenyan infrastructure to leave a portion of their earnings to support the country. Without this, how will we sustain the resources they rely on?" Mbadi said.
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Tax proposals at a glance
The suggested tax changes, outlined in the Tax Laws (Amendment) Bill 2024, seek to broaden the definition of a ';digital marketplace' to include services such as ride-hailing, food delivery, and freelance work.
A key change is the replacement of the 1.5% Digital Presence Tax with a 6% Significant Economic Presence Tax (SEPT).
The legislation also proposes a 15% excise duty on social media and internet services, which has sparked public concern.
Critics argue that the measures could lead to increased data costs, hindering accessibility and affordability for many Kenyans.
Potential impact of the tax
The ripple effects of the tax are expected to hit telecommunication companies, which may pass on the additional costs to consumers through higher internet charges.
Businesses relying on digital advertising and e-commerce could also face challenges, as platforms might increase fees to offset the new tax burden.
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Freelancers, small businesses, and influencers who depend on online platforms for visibility and income are likely to be affected by rising costs, potentially limiting their growth and reach.
Despite the backlash, Mbadi defended the proposals, highlighting the need for fairness in how Kenya benefits from its digital economy.
"Our creative and hardworking people use these platforms, but it is only right that the owners of these platforms also contribute to maintaining the infrastructure that makes their operations possible," he added.
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As the Tax Laws (Amendment) Bill 2024 progresses through Parliament, the government faces the challenge of balancing the need for revenue with the potential economic implications for businesses and individuals.