Tuesday, June 18, 2024

Uber and Bolt warn they will quit Kenya if proposed tax is passed

Taxi-ride hailing platforms Uber and Bolt have warned that they will quit the Kenyan market if a tax proposal that is part of the highly controversial Finance Bill 2024 is passed.

The two platforms have warned that the tax known as the Significant Economic Presence Tax (SEP) will result in losses and low margins which will effectively kill the ride-hailing industry.

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The two firms spoke when they presented their grievances before the National Assembly’s Finance and Planning committee.

Uber and Bolt say that the tax will make their operational costs too high to sustain. Under the controversial Finance Bill 2024, the National Treasury has proposed a 6 per cent SEP tax on the gross turnover for non-resident firms. These firms include the two digital taxi businesses.

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This tax, if passed, will replace the Digital Service Tax (DST). The DST currently charges a rate of 1.5 per cent.

“By introducing the 6 per cent Significant Economic Presence Tax, the effective tax rate for a non-resident in the digital market space will be 22 per cent on gross turnover. This is without taking into consideration the operating costs,” said George Abasy who is the Public Policy Manager at Bolt.

“Non-resident companies currently pay Value Added Tax (VAT) at a rate of 16 per cent with no opportunity to deduct input VAT. They also pay 1.5 per cent in DST giving an effective tax rate of 17.5 per cent on gross turnover, not profit.”

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Additionally, Bolt Africa Tax Manager Celia Kuria said that with the SEP, Bolt will be taxed at 22 per cent on the topline in addition to a commission that is capped at 18 per cent and a VAT of 16 per cent. This, she said, will result in the profit for a Sh. 500 taxi ride falling from Sh. 1.40 to a net loss of negative Sh. 2.

On its part, Uber said that the SEP should be scrapped altogether. “The SEP does not indicate how a non-resident person will be deemed to have created a significant economic presence in Kenya, therefore becoming liable to tax in Kenya,” said Chizeba Nnonyeh, the Uber Africa Tax Manager.

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