The Ministry of Treasury and Economic Planning has proposed new tax reforms that seek to expand the definition of the digital marketplace in a bid to build more revenue.
Treasury CS John Mbadi, through the Tax Laws (Amendment) Bill, 2024, has proposed a raft of tax proposals, amongst which includes amending Section 3 of the Tax Income Act and expanding the definition of the digital marketplace to include ride-hailing services, food delivery services, freelance services, and professional services, among others.
“The Bill seeks to amend Section 3 of the Income Tax Act in the definition of term digital marketplace by including ride-hailing services, food delivery services, freelance services, professional services etc,” the statement read in part.
In this move, the Treasury seeks to impose new taxes on income acquired over business done over the internet or an electronic network. The proposal is set to bring owners of these businesses into the tax net.
“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 statement mentioned.
The Government has come up with the new tax proposals after the seventh and eighth reviews on disbursement revealed that the Treasury fell short of their targets by Ksh34.3 billion. In addition, the withdrawal of the Finance Bill 2024 which had sought to bring in proposals that were aimed at increasing revenue necessitated the fresh Amendment Bill.
With this new proposal, the government is looking to tap into the rapidly growing digital marketplace that is becoming a significant contributor to the economy.
In Kenya, ride-hailing services- taxis, have an adoption rate of 46 per cent which is the third highest adoption rate in Africa. Bolt is the leading ride-hailing service provider in Kenya with Uber and Safeboda closing out the top three.
Food delivery services are another prominent fixture in the digital marketplace in Kenya. On a broader perspective, the online food delivery market in Africa is projected to reach USD 13.75 billion by 2024 with an annual growth rate of 12.66 per cent. In Kenya, apps like Glovo, Jumia Foods, and Uber Eats are the three big players in the market.
According to Statista, the revenue in the Online Food Delivery market in Kenya is projected to reach USD 436.20 million(Ksh56.2 billion) in 2024. This is expected to show an annual growth rate (CAGR 2024-2029) of 7.77 percent, resulting in a projected market volume of USD 634.10 million (Ksh81.7 billion) by 2029.
Freelance services have taken root in the country with a multitude of sectors countrywide breeding with freelancers who have been able to create income for themselves. With these tax proposals, the Treasury seeks to shine a light on the freelancing industry.
The new proposals to tax certain areas in the digital marketplace by CS Mbadi are surely set to send a ripple effect to the pockets of Kenyans who are active participants in this ecosystem. The proposals are set to be tabled before Parliament and debated before the House.
Aside from the Tax Laws (Amendment) Bill 2024, other measures put forward by CS Mbadi include the Tax Procedures (Amendment) Bill 2024 and Public Finance (Amendment) Bills.
