As part of the proposed Finance Bill 2024, the Kenyan government is considering raising the excise duty on telephone and internet services. This move, spearheaded by the National Treasury, aims to amend the current legislation by increasing the excise duty rate from 15% to 20%. If the bill is enacted on July 1 as proposed, Kenyans could see a substantial increase in the cost of making phone calls and accessing the internet.
Key Details of the Proposed Amendment
- Excise Duty Hike: The bill seeks to replace the expression “fifteen per cent” with “twenty per cent,” directly increasing the tax burden on telephone and internet data services.
- Impact on Consumers: With telecommunications companies likely to pass on these additional costs, Kenyans will have to spend more on their regular communication needs.
- Effect on Money Transfers: The legislation also proposes a rise in excise duty for money transfer services, which could increase the costs of sending money across the country.
Challenges to Digital Infrastructure Goals
This tax increase contrasts with President William Ruto’s ambitious vision for expanding Kenya’s digital infrastructure. The president has been advocating for nationwide free internet access to promote innovation and enhance mobile phone services. This tax hike, however, could pose challenges to achieving this vision, as it raises barriers for many Kenyans who rely heavily on affordable internet access and phone services.
Historical Context
- Prior Increases: In the 2020/21 fiscal year, a similar hike was proposed to raise the excise duty on phone and internet services from 15% to 20%, affecting Short Message Service (SMS) charges.
- Earlier Tax Adjustments: In 2018, the government increased the excise duty rate for calls and internet from 10% to 15%, indicating a historical trend toward raising taxes on these essential services.
Statistical Overview of Internet Usage
Kenya’s growing digital economy currently has about 22.71 million internet users, representing a 40.8% internet penetration rate at the start of 2024. The proposed increase in excise duty could significantly impact these users, particularly those in rural areas or with limited financial resources.
Other Excise Duty Increases
Alongside these changes, the National Treasury is also seeking to increase excise duty on betting, gaming, and prize competitions, with proposed rates rising from 15% to 20%.
Conclusion
The Finance Bill 2024 has the potential to reshape Kenya’s digital landscape by affecting access to essential communication services. While it aims to increase government revenue, this hike could impact millions of Kenyans who depend on affordable internet and mobile services. The government will need to balance its need for increased revenue with the accessibility goals championed by President Ruto.
