CS Mbadi Clarifies Proposed Social Media Platforms Tax
Treasury and Economic Planning Cabinet Secretary John Mbadi clarified the proposed levies on internet and social media companies.
Mbadi stated before the National Assembly Finance Committee that the tax reforms are aimed at global corporations rather than Kenyan taxpayers.
The Treasury Ministry has proposed the Tax Laws (Amendment) Bill of 2024, which includes the new tax measures.
“Why would we just tax our Kenyans who are using these digital and social media platforms while the owners of these platforms are not paying anything?” the CS asked.
The Tax Laws (Amendment) Bill proposes to expand the definition of “digital marketplace” in section 3 of the Income Tax Act to include “ride-hailing services,” “food delivery services,” “freelance services,” “professional services,” and so on.
This, according to the Ministry, is essential for the taxation of income deriving from business conducted over the Internet or an electronic network, including through the digital marketplace.
Treasury CS John Mbadi tells finance committee that the proposed tax on digital and social media platforms targets multinational firms and not Kenyan users pic.twitter.com/7TwBZFWHHu
— NTV Kenya (@ntvkenya) November 15, 2024
In the Bill, Mbadi aims to implement the Significant Economic Presence Tax (SEPT) at six percent to replace the Digital Presence Tax which is now at 1.5 percent.
The CS was responding to public criticism over the change of section 3 as many perceived it as a move that would weaken Kenyans’ engagement on social media.
“When we make the (tax) proposal people don’t understand it and quickly say that the government is raiding the social media space,” he asserted.
“That is far from the truth. We are saying that if you are doing business in Kenya as a foreign company you must leave part of the proceeds here to benefit Kenya’s economy.”
Mbadi stated that the country provided a favorable environment for owners of digital and social media platforms and that the levy would help to maintain the infrastructure.
“We have created the infrastructure for you (owners of social and digital platforms). There is the internet connectivity that you are using that the Kenyan taxpayer has paid for,” Mbadi stated.
“So we must gain. How will we maintain that infrastructure if we do not get part of the proceeds that you generate to come back to our economy?”
The CS also used the opportunity to rally support for the SEPT tax and the Minimum Top Up Tax (MTUT) that he plans to implement.
The MTUT tax aims to address tax base erosion among multinational enterprises (MNEs).
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This proposal establishes a minimum effective tax rate of 15% for enterprises with a consolidated annual turnover of more than 100 billion shillings.
Companies paying less than this percentage will need to increase their tax contributions to achieve the threshold.
“The Significant Economic Presence Tax and Minimum Top Up Tax should be supported,” he asserted.
“This is because these are huge multinational organizations with high turnovers of over Ksh100 billion per year. We need to have a system where at least 15 percent is paid to us in tax.”
CS Mbadi Clarifies Proposed Social Media Platforms Tax
