Finance Bill 2024: Kenyan e-commerce players express concern over new taxes

• The Ministry of Finance plans to impose a SEP tax of 6% on total turnover on non-resident companies that derive revenue from digital marketplaces.
• The significant economic presence tax would replace the digital services tax, which is currently levied at a rate of 1.5%.
• Bright Monday CEO Chris Otundo argued that the tax would impact the profitability and operational costs of e-commerce platforms.

Japhet Ruto, a journalist at TUKO.co.ke, has over eight years of experience in finance, business and technology reporting, providing deep insights into economic trends in Kenya and globally.

E-commerce players in Kenya have expressed concern over the introduction of new taxes in the 2024 Finance Bill.

What did the e-commerce folks say?

The e-Biz Kwa Vijana project, conducted by BrighterMonday Kenya, argued that the Significant Economic Presence (SEP) tax will have a significant impact on the profitability and operational costs of e-commerce platforms.

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The Ministry of Finance plans to impose a 6% SEP tax on the total turnover of non-resident companies that derive revenue from digital marketplaces.

The Significant Economic Presence Tax will replace the Digital Services Tax, which is currently levied at a rate of 1.5%.

Bright Monday CEO Chris Otundo said the 20 percent withholding tax for non-residents and 5 percent for residents in the e-commerce sector could pose compliance challenges for small sellers and discourage them from participating in marketplaces.

“As stakeholders, we call for continued engagement, knowledge sharing and collaboration with government and relevant departments to address these concerns as the growth of the e-commerce ecosystem will depend heavily on how businesses, especially young entrepreneurs, adapt to this changing tax environment,” Otundo said in a statement seen by TUKO.co.ke.

Why Bolt and Uber issued warnings

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Representatives from Uber and Bolt also appeared before Parliament's Finance and Planning Committee, arguing that imposing a tax would lead to the collapse of the taxi industry.

Bolt public policy manager George Abassy noted that the implementation of the SEP will increase taxes on non-residents to 22%.

Abbasi argued that imposing taxes would lead to losses and lower profit margins.

What are the other issues with the Finance Bill, 2024?

Source: TUKO.co.ke