CS Mbadi Targets Content Creators, Social Media & Online Businesses With 15% Tax

Kenyans operating social media and online businesses will be forced to pay a 15 per cent tax in a new raft of proposals that also target content creators.

This is according to a draft proposal published in one of the local dailies by National Assembly Clerk Samuel Njoroge, revealing key tax amendment laws from the National Treasury which are aimed at collecting revenue from the online space.

The Tax Laws (Amendment) Bill, 2024, sponsored by the Leader of Majority, Kimani Ichung’wah, seeks to impose 15 per cent in excise duty fees charged on social media and internet services. 

Should the proposal sail through Parliament, a 15 per cent tax would be added to the cost of any fees that are charged to users for accessing the internet or social media services.

Treasury Cabinet Secretary, John Mbadi at his office on August 12, 2024. /NATIONAL TREASURY

This would mean that telecommunication companies that provide internet services will be hit with increased operational costs, forcing them to pass on the tax to consumers.

This is likely to lead to higher data and internet bundle prices, which could hinder accessibility and affordability for many users. Internet service providers, serving both residential and businesses, might also raise subscription rates to cover the added expense. 

The proposals could also hurt the digital advertising and e-commerce sectors. As social media platforms potentially increase advertising fees to accommodate the tax, digital marketing firms, advertisers, and online retailers will bear the brunt of these costs. 

SMEs, freelancers, and influencers who depend on social media for client engagement, brand visibility, and sales could see their reach reduced due to higher advertising costs, thus making it very tough for content creators and digital media platforms to earn a living through social media.

But what is a twist is the proposal to reduce the amount of exercise duty charged on telephone and data services from the current 15 to 12 per cent, a proposal that if passed could see a slight reduction in the cost of mobile usage services, enabling Kenyans to access related costs at affordable prices.

In the Finance Act 2023, the government allowed the reduction of the amount of exercise duty charged on telephone and internet usage services, reducing the duty from 20 to 15 per cent. A further reduction of 3 per cent would mean that the costs could fall.

The Bill would further enable voice calls, messaging, and internet access to come down even as Kenyans continue to be on the receiving end of high rates for the services.

Already, Parliament on Thursday published information calling for the submission of public views on the proposals and contents of the bills from the Treasury.

A reduction in the cost of internet access would mean nothing for those earning a living through the internet given that they still have to earn revenue for themselves through that channel. Therefore, the proposal to impose the 15 per cent tax would force them to charge higher for their services, a matter which could scare away companies already having to deal with budget constraints of their own due to the punitive tax measures.

This would lower the lucrative appeal that online, social media business and content creation has amassed in the country over the years, more prominently in 2020 during the height of the COVID-19 pandemic. Even though stars might continue to emerge in that space, the proposals could leave them asking ‘Is it really worth it?’

In the Finance Bill 2023, the government had proposed to impose a 15 per cent withholding tax for content monetization before sustained uproar saw it cut down further over fears that it would risk killing content creation which was still young in the country.

This proposal now presents a new challenge for online users who rely on the internet to make money, given how advancements on social media platforms have only served to reduce the revenue one earns for making content, forcing many content creators to expand to affiliate advertising which these days has very little budget.

President William Ruto samples one of the phones at the East Africa Device Assembly Kenya factory in Athi River, Machakos on October 30, 2023. /PCS