Treasury CS Mbadi Clarifies Proposed Tax on Social Media Platforms

Mbadi Treasury
Treasury Cabinet Secretary John Mbadi during the review of Performance Contracting and Validation Meeting at the Treasury Building on October 9,2024.
Ministry of Treasury

Treasury and Economic Planning Cabinet Secretary John Mbadi has provided clarity on the proposed taxes on digital and social media platforms. 

While appearing before the National Assembly Finance Committee, Mbadi outlined that the tax reforms target multinational firms and not Kenyan users. The new tax proposals fall under the Tax Laws (Amendment) Bill of 2024 that has been forwarded by the Treasury Ministry.

“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 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, according to the Ministry, is relevant for taxation of income accruing from business carried out over the internet or an electronic network, including through the digital marketplace.  

Taxi vehicles pictured while parking along Nairobi's Central Business District on July 9, 2021.
Taxi vehicles pictured while parking along Nairobi's Central Business District on July 9, 2021.
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In the Bill, Mbadi seeks to introduce the Significant Economic Presence Tax (SEPT) at six per cent to replace the Digital Presence Tax which is currently at 1.5 per cent.  

The CS was responding to public uproar over the amendment of section 3 as many saw it as a move that would undermine Kenyans’ activity 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. 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,” he asserted. 

Mbadi argued that the country provides a conducive environment for the owners of digital and social media platforms and the tax would go a long way in maintaining the infrastructure involved.

“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. 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?” he posed.

The CS also took the opportunity to drum up support for the SEPT tax and the Minimum Top Up Tax(MTUT) that he seeks to introduce. 

The MTUT tax seeks to address tax base erosion among multinational enterprises (MNEs). This measure sets a minimum effective tax rate of 15% for companies with a consolidated annual turnover exceeding 100 billion shillings. Companies paying less than this rate will be required to top up their tax contributions to meet the threshold.   

“The Significant Economic Presence Tax and Minimum Top Up Tax should be supported. 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 per cent is paid to us in tax.,” he asserted.

National Treasury PS on July 23, 2024, presenting Consolidated Fund Services under the Supplementary 1 Budget estimates for FY 2024/25.
National Treasury PS on July 23, 2024, presenting Consolidated Fund Services under the Supplementary 1 Budget estimates for FY 2024/25.
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The National Treasury & Economic Planning