While defending the tax, Mbadi explained that it makes no logic for Kenyans to pay taxes for use of social media yet the owners of those platforms are exempted.
This, he added, is compounded by the fact these foreign firms enjoy good infrastructure enabled by the government.
“I have heard people talk about social media then they say our people are very creative, which is true. They are using platforms of people out there, why would we just tax our Kenyans who are using that platform yet the owners are not paying anything?” he posed.
Speaking when he appeared in parliament, Mbadi strongly denied reports that the government is "raiding” social media as it seeks to increase its revenue base.
“We are saying if you are doing business here and you are out there you must leave part of the proceeds here to benefit this economy,” he stated.
The Tax Laws (Amendment) Bill, 2024, sponsored by majority leader Kimani Ichung’wah is currently before the National Assembly.
If passed, the tax would be added to the cost of any fees charged to users for accessing the Internet or social media platforms.
Kenyans and especially social media users have raised fears that this tax while targeting service providers, is likely to be passed on to them in the form of higher data and internet bundle costs.
The Income Tax Act is to be amended to introduce a new tax known as a significant economic presence tax.
It shall be payable to non-residents whose income from the provision of services is derived from or accrues in Kenya through a business carried out over a digital marketplace.
“For the purposes of this section, a non-resident shall be considered to have a significant economic presence where the user of the service is located in Kenya,” it states.
It shall, however, not apply to a non-resident providing digital services to an airline in which the government has at least 45 per cent shareholding.
In a bid to address the cost of communication services, the Bill also proposes a reduction in the exercise duty on telephone and data services from the current 15 per cent to 12 per cent.
Mbadi added the particular companies are currently using internet connectivity which the taxpayers are paying for.
“These are multinational organisations with turnovers of over Sh100 billion a year and you find that they pay less than 15 per cent as tax yet those other organisations in Kenya pay 30 per cent corporate tax,” he remarked.
