Kenya’s plans to tax media streaming sites and other apps operating in the country are a threat which will kill the nascent internet enterprises.
with this in mind, the second annual Financial Literacy & Opportunity Week (FLOWK) is currently underway in Nairobi bringing together over 350 delegates to deliberate on how technology impacts financial inclusion and literacy.
Themed “Financial Inclusion & Empowerment in the Digital Age”, the event brings together stakeholders from the government and the financial sector in Kenya.
Delegates are drawn from the government, regulatory bodies, SACCOs, banks, digital lenders, insurance institutions, research and academic bodies and the business community.
Some of the key areas in focus are financial inclusion and social welfare, internet access and community empowerment.
Growth trends and lessons in mobile-based credit, disconnect and missed opportunities and financial literacy and poverty reduction programmes are also part of the discussion.
Kenya hits 82.9 per cent in access to formal financial inclusion
Access to formal financial services and products in Kenya improved from 75.3 per cent in 2016 to 82.9 per cent in 2019.
The survey by the Central Bank of Kenya (CBK), Kenya National Bureau of Statistics (KNBS) and FSD Kenya shows that more Kenyans have access to formal financial services and regularly interact with financial products owned by banks, Saccos, telcos, microfinance and insurance firms.
The 2019 FinAccess Household Survey noted that mobile money has been instrumental in deepening financial inclusion.
While the impressive growth in financial inclusion in Kenya and in the region has brought about innumerable opportunities, the government’s move to tax the sector will roll back the gains.
A report by the Africa Growth Initiative at Brookings notes that some countries in sub-Saharan Africa view mobile phones as a booming sub-sector easy to tax. Kenya has taken this approach and the taxation regime is slowly killing the sector.
Kenya has zoned in on the sector due to the increasing turnover of transactions and the formal nature of such transactions by both formal and informal enterprises.
Taxing social media apps in Kenya
The country also plans to start taxing media streaming sites like Netflix and YouTube and other apps operating in Kenya.
This comes at a time when Kenya Revenue Authority (KRA) is seeking to raise funds for its debt servicing which seems to be spiralling out of control.
KRA is working in conjunction with the Communications Commission of Kenya (CA) to collect revenue from every app downloaded.
In Africa, a similar legislation in Cameroon forces Telcos to pay a certain percentage for every mobile app downloaded.
KRA is trying to justify this saying that provision of online platforms for use by third parties is a taxable supply under the Value Added Tax Act of 2013.
This means that this will attract the standard 16 per cent levy.
While financial inclusion attracts companies to create transformative financial products that change the lives of ordinary Kenyans, the proposal to tax the sector will negatively affect this growth.
As the taxation spree gets out of hand, citizens who should be motivated to spend will instead focus elsewhere to avoid the taxation.
The future of streaming services in Africa
Kwesé iflix CEO, Mayur Patel says that the future of TV is the internet and the home of the internet in Africa is mobile.
Speaking to Geopoll, Patel added, “More than 80 per cent of broadband in Africa is accessed via smartphones and tablets.”
Consumers in the African market will increasingly connect with the content they love via mobile devices.
“Many of our users in the region have bypassed traditional linear broadcast TV, and their first experience of TV is on their mobile phone,” he said.
There has been an explosion in the short form content segment where mobile users are the main target.
Producers are increasingly partnering with mobile streaming services to access the growing market.
While this is a beautiful description of the ideal future of entertainment consumption, the taxation will nip it in the bud losing even more.
It is likely that African governments are waging a war they won’t win by overtaxing their citizens.
The ideal for the government is to collect as much as possible from their people but the breaking with tough economic times is not far off.
For instance, Kenya has been taxing almost every commodity since 2017 making life unbearable for many. This has led to people hoarding and shying from spending as they shift priorities.
The East African economic hub started with increasing taxation on fuel in 2017 and it has become worse for citizens from then.
Uganda has been taxing its citizen for internet use while other African countries are following suit.