Understanding Digital Taxation in Kenya, by Liz Orembo, KICTANet
Twitter: @lizorembo
GNI members work together to leverage each other’s unique expertise and perspectives to advance and protect freedom of expression and privacy in the ICT sector around the world. The six GNI-Internews Fellows have each designed a research project that draws on the unique affordances of this multistakeholder model of collaboration. By pursuing this research throughout their term, fellows apply their GNI participation directly to issues of importance to them.
This February, I was honored to be selected as a GNI-Internews Fellow. As part of the fellowship, I will examine Internet tax regimes in Kenya and the effect these have on citizens’ rights to access information and freedom of expression. Many concerns arise from the proposed taxation methods, including backward movement on efforts to improve Internet access and the implementation of potential surveillance and censorship mechanisms.
Kenya’s Efforts to Improve Internet Access
The importance of Internet access in Kenya increases yearly as the government moves more and more of its services online and introduces new programmes such as digital literacy in the education sector. Even more, the current situation around COVID-19 is a reminder that Internet access ought to be one of the top priorities in the government’s agenda as Kenya’s citizens go online for education, business, and other essential services. Indeed, learning in education institutions has stalled due to the underestimated Internet access gaps across the country.
There are 18 million broadband internet users in Kenya, representing about a 40% internet penetration rate. Access in rural areas and informal settlements is restricted by infrastructure and affordability challenges.
The Universal Service Fund (USF) was established to close these access gaps. The Fund is supported by a 1% levy on telecommunications operators’ revenue. So far, the funds have been used to boost mobile networks and set up community networks in public commons, such as schools and libraries. Though a start, this is not enough: there are still large areas of the country without Internet access.
In 2018, Kenya revised its broadband strategy. The policy document recognizes the need to support policies such as the Access to Information Act 2016, the ICT Policy, the Critical Infrastructure bill and the Data Protection Act. However, implementation remains a challenge. For instance, it has been more than six months since the country enacted the Data Protection Act, but the office of the Data Protection Commission called for in the legislation is yet to be established. Similarly, the Access to Information Act remains largely unimplemented, as many public officials lack awareness on its enforcement.
More Taxes, More Barriers to Access
Despite the aforementioned efforts to create an “enabling environment” for improved internet access, taxing the internet introduces new challenges and barriers to internet adoption.
In 2018, the government increased Internet consumer tax from 10% to 15% as a way of increasing fiscal income. This cost was passed down to the consumers by the major Internet service providers. Increase of tax during this period is believed to have been brought about by Kenya’s budget deficit; the government began servicing huge loans while at the same time expanding its budget for ‘ambitious’ projects promised during the period of elections campaigns. Through the period of 2019, the Kenya Revenue Authority (KRA) has also been exploring ways through which it can increase revenue by taxing the digital economy. Some of these proposals have been updated in the Tax Laws Amendment Act 2020, including taxing multinational Internet companies, application downloads and social media advertising. Meanwhile, in a recent call for public participation, the KRA indicated that it will install surveillance equipment on network routers to monitor Internet activities. The revenue authority has recently won a case on access to third party transactions in an effort to more easily identify those evading tax payments.
Other countries in the region have also introduced new policies on internet taxation. Uganda introduced social media tax to curb ‘gossip’. Tanzania also introduced taxes in form of licensing fees for content creators. And Zambia introduced similar taxes to Uganda where users calling over the internet are charged additional 3 cents per day by their telecom operators.
There is a dire need for research and policy guidance on digital taxation. Through the GNI-Internews Fellowship, the Kenya ICT Action Network (KICTANet) will develop a policy brief to guide policy makers in Kenya and in the East African region on the threats to freedom of expression and privacy that arise from Internet taxation mechanisms.
