Media owners warn of Sh2 billion loss if Finance Bill passes

Media owners have warned that the industry will lose more than Sh2 billion in revenue if Parliament approves the imposition of a 15 per cent excise duty on alcohol, betting, gaming, lotteries and prize competition advertisements.

The Media Owners Association (MOA) told the National Assembly’s Finance and Planning committee that the proposed excise duty would generally mean an increase in advertising costs by 15 per cent for the affected companies.

“Our calculations across the industry show that the financial impact of the 15 per cent excise duty will be more than Sh2 billion,” Nation Media Group Head of External Affairs Clifford Machoka said. “Our expectation is that these companies will significantly reduce their expenditure on advertisements, an action that will negatively impact our revenues and lead to cost-cutting measures, including laying off personnel.”

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MOA said advertising revenues play a critical role in sustaining the media ecosystem, enabling the industry to provide diverse and high quality content. It added that very few businesses can currently accommodate an increase in expenses.

“Alcohol and betting/gaming products already suffer significant excise duty, so excise duty on advertisements would be a second level of excise duty on the products,” MOA chairperson Agnes Kalekye said. “Our proposal is that you delete the clause in its entirety from the Finance Bill, 2023.”

MOA also rejected a proposals in the Bill that seeks to introduce a 15 per cent withholding tax on digital content monetisation.

“The concern for the media industry is that news is increasingly being disseminated electronically or digitally, and members of the general public who subscribe to such content would then be required to withhold tax when paying subscriptions,” Mr Machoka said. “If digital content creators are taxed at this point in time when the industry is yet to develop, the youth, most of whom engage in digital content creation, would be extremely demoralised.”

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They asked MPs to delete the proposal to introduce tax on digital content monetisation to give the industry room to grow before introducing tax.

The media owners further proposed the deletion of a section of the Bill that seeks to introduce a 5 per cent withholding tax on payments in respect of sales promotions, marketing and advertising services.

“Our biggest concern as the media industry is that a significant part of our income arises from such services, and if all our customers withhold 5 per cent of our income, a large amount of our cash flow would be tied down in advance taxes,” the association said. “A good number of our members are already suffering cash flow constraints due to the 2 per cent withholding VAT, so an additional 5 per cent withholding tax will cripple the industry.”

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Another proposal the association wants removed is the requirement for taxpayers to deposit 20 per cent of the disputed tax into a special account before lodging an appeal. Introduction of a new income tax bracket at the rate of 35 per cent on incomes higher than Sh500,000 per month was also opposed.

“Our concern with the proposal is that it would significantly reduce the net-of-tax remuneration for senior employees who are less than 10 per cent, and thus create a negative knock-on effect to the economy,” the association said.

On the for housing fund deductions, MOA said the 3 per cent levy will hurt employees who are already heavily burdened with taxes and contributions to the National Health Insurance Fund and the national Social Security Fund.

“We propose that you delete the proposal in its entirety or make the contribution optional for employees and exclude employers from contributing,” MOA said.