Paradigm Initiative condemns new internet tax in Kenya

Online advocacy group Paradigm Initiative has lambasted Kenya's government for imposing a 15% excise duty on telephone and internet data services.

In a statement, the organisation said President Uhuru Kenyatta left Kenyans surprised by recently proposing an increase in Internet Tax through the alteration of the Finance Bill 2018.

"This Bill was earlier declared illegal by the High Court," read an excerpt from the statement.

"This tax increase comes at a time when subscribers are also paying increased fee on mobile money transfer services after the government raised excise duty from 10% to 20% in July 2018," it continued.

Wathagi Ndungu, Paradigm Initiative's Google Policy Fellow for Eastern and Southern Africa, said, "This action comes after a public outcry for a reduction on the tax on petroleum products. The president intimated that revenue had to come from somewhere and the first to suffer are Internet data services."

"Due to this approval, excise duty will increase on telephone, Internet data and mobile phone services. Business will be greatly affected especially small businesses that rely heavily on mobile and Internet money transfer. Other businesses that will suffer by this tax introduction include online businesses such as Vlogging, online writing, e-commerce stores, telemarketing and blogging," Ndungu added.

Parliament is understood to have approved a directive by the President which was formally introduced via memorandum and read: "Telephone and internet data services shall be charged excise duty at a rate of fifteen percent of their excisable value. Excise duty on fees charged for money transfer services by banks, money transfer agencies and other financial service providers shall be twenty percent of their excisable value."

According to Paradigm Initiative, what this means is that 100 Kenya shillings worth of airtime that currently attracts 10 Kenya shillings tax will now see the Treasury earn an extra 15 Kenya shillings.

This tax is estimated to affect over 44.1 million subscribers, going by the figure on mobile subscribers contained in Communications Authority of Kenya third quarter report to March 2018.

"The situation is disappointing since Kenyans are already among the most heavily taxed income earners in the world without any evidence as to how they benefit from these heavy taxes," Ndungu concluded.