New Bill Proposes Significant Tax on Internet Businesses While Reducing Excise Duty on Data

Kenyans engaged in online businesses and social media content creation will soon face a 15% tax under new proposals. A draft published in a local daily by National Assembly Clerk Samuel Njoroge outlines key amendments from the National Treasury aimed at enhancing social media and phone usage while addressing communication service costs.

The Tax Laws (Amendment) Bill, 2024, sponsored by Majority Leader Kimani Ichung’wah, proposes a 15% excise duty on social media and internet services. If approved by Parliament, this tax will be added to any fees users incur for accessing internet or social media platforms.

Telecommunication companies that provide internet services may experience increased operational costs under this new proposal. They are likely to pass on the tax to consumers, resulting in higher prices for data and internet bundles, which could hinder accessibility and affordability for many users. Internet service providers catering to both residential and business clients may also raise subscription rates to offset the new expenses.

The digital advertising and e-commerce sectors could also see significant repercussions. Social media platforms may increase advertising fees to cover the tax, placing additional burdens on digital marketing firms, advertisers, and online retailers. Small and medium-sized enterprises (SMEs), freelancers, and influencers who rely on social media for client engagement, brand visibility, and sales may find their reach diminished due to increased advertising costs.

Additionally, the Bill proposes to reduce the excise duty on telephone and data services from the current 15% to 12%. If passed, this reduction could lead to slightly lower mobile service costs, making these services more affordable for Kenyans.

The Finance Act 2023 previously approved a reduction in excise duty on telephone and internet services from 20% to 15%, so a further decrease of 3% would contribute to lower costs.

This legislation aims to reduce prices for voice calls, messaging, and internet access while addressing the high rates that continue to burden consumers. The government has been under pressure to lower mobile communication costs, with the East African Community (EAC) Technical Committee on Communications recommending a cap on data roaming charges at 65 cents per megabyte in October this year.

Roaming allows mobile phone users to make calls, send texts, and access the internet when outside their home network’s coverage area, typically while traveling abroad. If the EAC’s proposal is approved, it could lead to cheaper rates for Kenyans making phone calls back home from neighboring countries like Uganda and Tanzania.

On Thursday, Parliament published a call for public submissions regarding the proposals and content of the Treasury bills.