The National Treasury and Economic Planning Cabinet Secretary (CS) John Mbadi has clarified on the proposed taxation of the digital economy.
In an undated video, the CS refuted claims of the government raiding the social media space stating that the proposed tax targets the platform owners, not the digital creatives.
In addition, Mbadi said that digital platform owners enjoy the infrastructure laid by the Kenyan taxpayers therefore they should contribute to the country’s economy by paying a certain percentage of the money they generate.
“I have heard people talk about social media space and then they say these people are just creative which is true our people are very creative and people who are out there have their platform here why would we just tax our Kenyans who are using that platform but the owners these platforms are not paying anything and when we make the proposal people don’t understand quickly they say ‘Mbadi or the government is raiding social media space.
“Further from the truth we are saying if you are doing business here and you are out there you must leave part of the profits here to benefit this economy because we have laid the infrastructure for you that internet connectivity that you are using Kenyan taxpayer has paid for it so we must gain how will we maintain that infrastructure if we don’t get the money you generate from here to come back to our economy,” CS Mbadi disclosed.
Mbadi went on to explain that the economic presence tax should be supported because the digital multinational organizations doing business in Kenya have a high turnover but pay less than 15 per cent as tax yet organizations in Kenya pay 30 per cent corporate tax.
“Significantly, economic presence tax should be supported so should be the minimum top-up tax because these are multinational organizations with high turnovers and you find they pay less than 15 per cent as tax yet those organizations in Kenya pay 30 per cent corporate tax so we need to have a system where at least 15 per cent is paid to us as taxation,” he added.
Proposed tax law
According to the National Treasury, the Tax Laws (Amendment) Bill,2024 on the digital marketplace is the Bill that seeks to amend section 3 of the Income Tax in the definition of the term “digital marketplace” by including “ride-hailing services” “food delivery services” “freelance services” “professional services” etc.
This definition is relevant for taxation of income accruing from business carried out over the internet or an electronic network, including through the digital marketplace. This proposal is to expand the tax base by bringing the income of the owners of the digital platforms that offer the above services into the tax net.
The Tax Laws (Amendment) Bill ,2024
Definition of digital marketplace.
The Bill seeks to amend section 3 of the Income Tax in the definition of the term “digital marketplace” by including “ride-hailing services” “food delivery services” “freelance services” “professional… pic.twitter.com/ailcMpuqQz
— The National Treasury & Economic Planning (@KeTreasury) November 15, 2024