The media has opposed the bid by President William Ruto's administration to tax digital content, betting and alcohol advertisements, and other sales promotions starting July 1.
In a memorandum to MPs, the Media Owners Association has implored the Molo MP Kuria Kimani-led Finance Committee to shoot down the proposed taxes.
MOA chairman Agnes Kalekye says the tax measures would worsen the cash-flow situation for the sector, saying it is already straining to net revenue.
The media owners further want several sections of the Finance Bill, 2023, including the bid for a three per cent Housing Fund levy re-looked, as well as the proposed increase of income tax to 35 per cent for salaries beyond half a million.
On the proposed 15 per cent withholding tax on digital content, MOA says taxing the sector would hamper the growth of the digital economy, and at the same time goes against the Kenya Kwanza promise to spur the creative industry.
“There is a need to give room for the industry to achieve its growth potential before introducing taxation,” Kalekye says in the memo.
MPs are set to begin public participation on the proposed taxes this week starting Monday.
The media owners hold that should the government insist on imposing the tax, it should be charged at five per cent and deal with administrative difficulties of collecting the tax.
Media owners have also asked MPs to delete the proposed five per cent withholding tax on payments in respect of sales promotions, marketing and advertising services.
The argument is that a significant part of media income arises from such services, hence customers withholding the same would amount to advance taxes.
“A good number of our members are already suffering cashflow constraints due to the two per cent withholding VAT (WhVAT). An additional 5 per cent WHT would cripple our industry,” Kalekye said.
Media owners further hold that administering the tax would be burdensome as most of the clients who buy advertisements – classifieds, adverts or obituaries, are walk-in customers.
“Managing a withholding tax with members of the general public would be extremely burdensome and may lead to significant tax leakages,” MOA says in its bid for MPs to delete the proposal entirely.
Media owners have also asked MPs to shelve the proposed 15 per cent excise duty on advertisements on television, print, billboards, and radio stations featuring betting, alcoholic beverages, and prize competitions.
They hold that the products themselves - alcohol and betting - are already subject to excise duty.
“The rationale behind introducing excise duty on advertisements for these products gets lost, and the products essentially end up facing multiple levels of excise duty taxation.”
The media advises that if the rationale is to regulate the advertisements, the same are already regulated with regard to the size and the timings at which they are aired.
“This proposal to introduce excise duty would only serve to negatively impact the advertising industry further, leading to significant loss of jobs,” Kalekye says.
Media owners further opposes the proposal that would see companies in tax disputes with the Kenya Revenue Authority deposit 20 per cent of the disputed amount.
“As the media industry, we are concerned that this proposal significantly inhibits a taxpayers’ fundamental right to access justice as laid down in the Constitution,” Kalekye says.
The media contends that such a system would encourage “baseless and unfounded assessments” adding that the measure may end up scaring potential investors.
“Very few businesses would be willing to tie down their cashflow in such deposits for lengthy periods, given that tax disputes can take quite lengthy periods to be resolved.”
Media owners further hold that the proposed law “is an obvious unconstitutionality” as only courts can give orders on whether a security is required in a dispute.
“To provide for a compulsory deposit and in an amount specified by a statute constitutes an unconstitutional and illegal interference with the independence of the Judiciary to determine the terms and conditions for an appeal,” the memo reads.
MOA is also opposed to the proposed three per cent Housing Fund levy, saying it would occasion job losses in order for employers to accommodate the additional budget.
“Having employers contribute the same amount for their employees significantly increases the cost of employment. Most employers would be forced to lay off a number of personnel to sustain those who would remain on the payroll.”
The media warns that the proposal could be counteractive to the Kenya Kwanza promise of creating avenues for more jobs.
“Make the contribution optional for employees and exclude employers from employing,” the association urges MPs.
Media owners are also against the proposed increment in income tax for employees earning more than Sh500,000.
They have asked MPs to retain the highest income tax rate at 30 per cent, arguing that it would reduce net-of-tax pay for employees and thus impact the economy through reduced spending.
“Most of the affected individuals are employers - in farms, in their residences, or even in their SME business ventures. Faced with reduced remuneration, the affected individuals are bound to cut down their expenditure on employment costs, which may lead to loss of jobs for a sizeable portion of the population, and this goes against the Government’s agenda to create jobs,” the MOA says.
Their take on this is that the government should expand the tax base to bring in a higher population into the tax net other than target “a very marginal portion of the citizenry at a tax rate that is higher by five per cent”.
The opposition, Federation of Kenya Employers and the ACK are among the groupings that have opposed some of Ruto's tax proposals.
