Uber and Bolt, the prominent players in the digital taxi-hailing sphere, have strongly cautioned against the proposed six per cent Significant Economic Presence (SEP) tax delineated in the 2024 Finance Bill, asserting that its enactment would unduly burden consumers and impede the growth of the ride-hailing sector.
In their presentation to the National Assembly Finance and Planning Committee, both companies underscored the adverse repercussions of the SEP tax, emphasizing its potential to drive up taxi fares and disrupt operational efficiency.
The Treasury’s proposal targets non-resident corporations, aiming to levy the SEP tax on income derived from large multinationals operating in Kenya, irrespective of their physical presence in the country. However, Uber and Bolt, representing American and Estonian interests respectively, voiced apprehensions regarding the excessive operational expenses that would result from this tax measure.
George Abasy, Bolt’s Public Policy Manager, decried the inequitable nature of the SEP tax, drawing parallels to the existing three per cent turnover tax imposed on digital service providers. Both companies advocated for maintaining the current tax rate of 1.5 per cent, arguing that an escalation would deter foreign direct investment and unfairly burden non-resident entities.
Additionally, they implored Parliament to dismiss Section 19 of the bill, which introduces a withholding tax on transactions conducted via digital marketplaces. Chizoba Nnonyelu, Uber’s Tax Manager in Africa, stressed the necessity for a revised strategy, proposing that platform operators facilitating payments should bear the responsibility of tax withholding, rather than individual users.
Spearheaded by Molo MP Kimani Kuria, who chairs the National Assembly Finance and Planning Committee, the 2024 Finance Bill seeks to supplant the Digital Service Tax (DST) with the SEP tax. Presently, the DST imposes a 1.5 per cent levy on the gross transaction value, in addition to the standard 16 per cent VAT.
Notably, Uganda recently introduced a 5 per cent DST on the gross digital services income garnered by non-resident providers, signaling a broader regional trend towards imposing taxes on digital transactions.
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