Finance Bill and its surprises for digital economy

The Finance Bill, 2023 has several surprises, including some that will significantly impact Kenya’s digital economy. There are five key components of the Bill that, if passed by Parliament, will change the trajectory of the country’s digital and creative economies.

These five areas are digital content monetisation, digital assets, digital services, mobile money and telephone and internet data services.

Let’s start with the most controversial one; digital content monetisation, which according to the Bill is defined as “offering for payment entertainment, social, literal, artistic, educational or any other material electronically through any medium or channel in any of the following forms…” including advertisements on websites, social media platforms or similar networks and sponsorships where a brand owner pays a content creator.

This Bill proposes a 15 per cent withholding tax on income earned by resident content creators from digital content monetisation.

Another proposal is the taxation of digital assets. Now, you have heard about cryptocurrencies (such as bitcoin) and non-fungible tokens (NFTs) and you are probably still trying to wrap your head around these concepts.

The Finance Bill is introducing the ‘digital assets tax’ and is proposing a three per cent tax on any income earned from the transfer or exchange of digital assets. It also outlines the details on tax remittance and filing of the amount.

Register for VAT

The third proposal is for those supplying imported digital services over the internet or through an electronic network or through a digital marketplace. They will be required to register for VAT, whether or not the taxable supplies meet the turnover threshold of Sh5 million.

With regard to telephone and internet data services, this Bill proposes a reduction in the excise duty from 15 per cent to 20 per cent. Lastly, this year’s Finance Bill proposes to increase the excise duty charged for money transfer services by cellular phone service providers (such as M-Pesa and Airtel Money) from 12 per cent to 15 per cent.

So, what does all this mean in the context of Kenya’s digital economy? First, it is important to note that the prominence the digital economy has been accorded in this year’s Finance Bill is a testament to the current government’s recognition of the socioeconomic impact of Kenya’s digital and creative economies. However, it is also critical to note that this country’s digital economy is still at its very early stages and still requires significant amount nurturing and support.

While it is important to analyse the growing tax burden on Kenya’s youth, I think a more important conversation would be on how to nurture, grow and expand the space for the digital and creative economies to create more job opportunities for Kenya’s youth while expanding the tax base to allow government to achieve its fiscal responsibilities.

We hope that, in the very near future, the government will lay out some very elaborate plans to grow this pristine sector, but most importantly, to deliver on an inclusive digital transformation.

Dr Chege is a media and technology researcher.