Kenyans operating businesses on social media platforms and online content creators will soon face a significant tax burden under a new bill introduced by the National Treasury.
The draft proposal, which was unveiled by National Assembly Clerk Samuel Njoroge, outlines key tax amendments aimed at increasing government revenue while addressing the growing cost of communication services.
The Tax Laws (Amendment) Bill, 2024, sponsored by the Leader of Majority Kimani Ichung’wah, proposes a 15% exercise duty on social media and internet services.
If passed, the new tax will be applied to the cost of internet access and social media services, effectively raising the prices for users.
This 15% levy would apply to both individuals and businesses using social media for commercial purposes, including online content creators, influencers, and e-commerce platforms.
The bill could significantly affect how businesses engage with audiences on digital platforms.
Social media-based businesses, including those run by small and medium-sized enterprises (SMEs), digital marketers, and influencers, may see a rise in operating costs as they would likely pass on the additional expense to consumers.
One of the most immediate impacts will be on internet service providers (ISPs), who may be forced to raise the prices of internet bundles and subscription rates to offset the added tax burden.
This could lead to a higher cost of internet access for the general public, particularly affecting low-income individuals and families who rely on affordable internet for communication, education, and business operations.
The proposal is also expected to impact the digital advertising and e-commerce sectors. Social media platforms, which are key to digital marketing, may increase their advertising fees to accommodate the tax, a move that would raise costs for advertisers, digital agencies, and online businesses.
SMEs and freelancers who depend on social media platforms for brand visibility and client engagement might struggle with increased advertising rates, leading to reduced outreach and potentially lower revenues.
Influencers who earn income from brand partnerships and sponsored content on platforms like Instagram, TikTok, and YouTube could also face higher operational costs, which may limit their earning potential.
Relief for Mobile Users in the Form of Reduced Tax on Data Services
In a move that could soften the blow for mobile users, the bill also proposes a reduction in the exercise duty on telephone and data services.
The current 15% tax on mobile data and phone services would be lowered to 12%, potentially reducing the cost of mobile communications for Kenyans.
This reduction could be a welcome relief for those who rely heavily on mobile phones for communication, business, and internet access.
The dual proposals in the bill—higher taxes on internet and social media services, alongside lower taxes on mobile services—reflect the government’s attempt to balance its revenue needs with its desire to maintain access to affordable communication services.
If the bill is passed by Parliament, it could have far-reaching consequences for Kenya’s burgeoning digital economy.
The country has seen a rapid increase in online businesses, digital advertising, and content creation, with social media platforms playing a crucial role in economic activities, from e-commerce to marketing, and even job creation for young people.
However, there is concern that the new tax could stifle growth in this sector, especially for small businesses and independent content creators who may already be struggling with rising costs and a competitive online marketplace.
For many digital entrepreneurs, increased costs could lead to reduced profit margins, lower consumer engagement, and a slower pace of innovation in the online space.
As the bill makes its way through Parliament, the proposed tax hike on internet and social media services is expected to spark debate.
