New tax amendments to raise cost of calls, internet, and betting

The National Treasury has proposed amendments to excise tax laws that would lead to higher costs for internet, phone calls, and gambling. If passed, these changes will increase excise duty on internet and telephone services from 15 per cent to 20 per cent, resulting in higher prices for consumers.

Currently, Airtel Kenya charges Sh2.93 per minute for calls across all networks, while Safaricom's rates are Sh2.50 during off-peak hours and Sh4.87 during peak hours.

The proposed tax changes would likely lead to increased charges for these services, impacting millions of users.

Additionally, the excise duty on betting, gaming, and lotteries is set to rise from 12.5 per cent to 15 per cent, aiming to boost revenue collected by the Kenya Revenue Authority from the gaming sector.

"Additionally, it is proposed to revise the excise duty on excisable services such as telephone and internet data services at 20 per cent; and betting, gaming, prize competitions and lotteries at 15 per cent," the Treasury stated in the Proposed Tax Laws (Amendment) Bill, 2024.

These proposals echo elements of the Finance Bill, 2024, which was shelved in June following widespread anti-tax protests that resulted in numerous casualties.

The earlier bill had suggested raising the excise duty on calls and internet services to 20 per cent, while the betting duty was initially set to increase to 20 per cent but is now proposed to stabilise at 15 per cent in the new tax amendments.

If enacted, these changes could further diminish consumers' purchasing power and potentially slow revenue growth for telecommunications providers and betting companies.

The Treasury has historically focused on the telecommunications and betting sectors, which are heavily utilised by the public.

Over the years, the excise duty rates on these services have fluctuated, with the new proposal returning to the 20 per cent rate that was in effect for the fiscal year ending in June 2023.

Previously, gambling was taxed at a rate of 7.5 per cent, but increased taxation aims to discourage the widespread betting culture in Kenya, where over Sh150 billion is staked annually.

The government faces pressure from the International Monetary Fund (IMF) to enhance revenue collection as part of its commitments to secure funding from the organisation.

"Given the elevated risks around the fiscal strategy, policy-making needs to be agile. Contingency planning remains critical, with policies adapting to evolving outcomes to safeguard stability and ensure that program objectives continue to be met," the IMF stated on Wednesday, following the disbursement of $606 million (Sh78.1 billion) to Kenya.

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