Treasury Cabinet Secretary John Mbadi has unveiled the government’s strategy to expand tax collection within the digital marketplace to help reduce Kenya’s Ksh.170 billion fiscal deficit.

This follows a recent Supreme Court decision overturning the Court of Appeal’s earlier ruling that had blocked the Finance Bill, 2024. As a result, the government now plans to reintroduce certain tax measures originally removed from the bill.

These measures will be reintroduced through three new legislative proposals: the Tax Laws (Amendment) Bill, 2024; the Tax Procedures (Amendment) Bill, 2024; and the Public Finance Management (Amendment) Bill, 2024.

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The Tax Laws (Amendment) Bill, in particular, aims to expand Section 3 of the Income Tax Act to include a wider range of digital service providers—such as ride-hailing, food delivery, professional, freelance, and rental services—ensuring that these operators contribute to national revenue.

Speaking at a town hall session on Citizen TV’s JKLive at Daystar University in Nairobi, Mbadi noted that one of the main hurdles in boosting tax revenue is the difficulty in taxing the digital economy.

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“Our tax collection is not keeping pace with GDP growth due to challenges in taxing the digital economy, alongside the agricultural and informal sectors,” he said.

However, Mbadi believes technology offers solutions, pointing to efforts to upgrade the Kenya Revenue Authority’s (KRA) digital systems to enhance revenue collection from digital operators.

“We’re investing in technology; Phase 1 of the KRA IT system upgrade has already been implemented, with Phase 2 on the way, which will improve tax visibility in both the digital and informal sectors,” he stated.

Treasury Principal Secretary Chris Kiptoo, who also attended the event, echoed Mbadi’s view. He emphasized that while digital marketplaces contribute significantly to the economy, their tax contributions have traditionally been low.

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He noted that current legislative proposals include a “minimum top-up tax” and a framework to tax businesses with a “significant economic presence” in Kenya, even if they lack a physical office.

Kiptoo added that companies operating within Kenya’s digital marketplace but without local ownership or offices would still be liable for taxes. “We’re broadening the definition of the digital marketplace, requiring all operators, including foreign ones like Uber, to contribute to our tax revenue,” he said.

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KRA Commissioner General Humphrey Wattanga also highlighted that Kenya is drawing on international best practices for digital commerce taxation, learning from other countries to adopt the most effective solutions.