The Senate Standing Committee on Information, Communication and Technology held a meeting this week with the Kenya Private Sector Alliance and the Kenya ICT Action Network to deliberate on emerging legislative and policy gaps in the ICT Sector.

Key Challenges

The presentation from the Sector highlighted the challenges that the Sector has been facing. The challenges include:

• Critical Infrastructure – For instance, way leave access challenges, unstable power, National 5G roadmap, increased Fibre Cuts due to Infrastructural developments and Sabotage, hacking and outdated software and hardware Management of the National Optical Fibre Infrastructure and the incorporation of Critical Infrastructure requirements into the new building code developed by the National Construction Authority.
• Taxation issues – it was noted that the taxation regime for the technology sector has in the recent past been subject to a number of new taxes. There is however a challenge in terms of the multiplicity of taxes that can make compliance a challenge.
• Emerging Technologies – For instance, Artificial Intelligence, 5G roadmap and use cases, Limited knowledge/Digital Literacy, Data privacy and security, Trust deficit, Community Networks, Adaption of systems and processes to emerging technologies and Registration of Financial Technology Companies with Central Bank of Kenya and payment of exorbitant fees.

Overtaxed Industry

In regards to taxes, the specific taxation laws affecting the sector are:

• VAT – 16%
• Internet Data tax 1.5% per transaction
• Excise duty on Internet data – 15%
• Income Tax through the Finance Act – 30% tiered
• The Value Added Tax (Digital Marketplace Supply) Regulations, 2020
• Income Tax Act and the Income Tax (Digital Service Tax) Regulations 2020.

The Sector noted that the total tax applicable to the industry is at 92.5% and that it is unfortunate that additional digital taxes are still being added. This may make Kenya a poor business and investment location.  The sector thus recommended that in order to avoid negative effects that may arise from such taxation, there is need for better clarity on the points of taxation and manner in which the taxes ought to be imposed.

In regards to policies, the Sector provided that there are currently 24 Acts that have been set aside for review by the Senate. Of the Acts, the Computer Misuse and Cybercrime, Act No. 5 of 2018, the Finance Act, 2018 and the Tax Laws Amendment Bill, 2018 have very pertinent issues relating to the sector. On the pending Bills before the two Houses of Parliament, it was noted that the Start-up Bill in Senate, ICT Practitioners Bill in the National Assembly, Film Bill in National Assembly and the Funding of the Critical Infrastructure Policy at the Ministry of Interior will have an impact on the ICT sector regulation in Kenya.

Sector Policy Priorities

In addition, the Sector also provided policy suggestions to the above challenges and issues of concern as is highlighted below.

• Policy Suggestions on Critical Infrastructure

1. Uniform way leave access laws across the country to spur last mile connectivity, and avoid exorbitant levies by local governments and unreasonable delays in licencing.
2. Consider affordable alternative forms of energy for critical Infrastructure (Solar)
3. Mandatory ducts of specified specifications on way leaves on all new roads to pull fibre optic cable within minimum time, and cost-effectively and protection from vandalism during road construction or water pipe laying.
4. Mandatory audits on critical infrastructure software and hardware to forestall failure, and prevent malicious actors.
5. Corporate governance and accountability for the .ke Registry
6. Compensation policy on unstable power provision
7. Streamline the Management of National Optical Fibre Infrastructure.
8. Secure critical Infrastructure
9. Enactment of the new building code that incorporates best practices that will support adoption of critical infrastructure.

• Policy suggestions on Taxation

1. Too many taxes which are confusing therefore there is a need for harmonization and offsetting one tax against another (for example corporation tax).
2. Consider best practices from other countries.
3. Increasing the period of public participation for various Bills
4. Review the Start-up Act.
5. Create Tax incentives that will spur innovation
6. Consider removing VAT on low end devices to make them more affordable

• Policy suggestions on Emerging Technologies

1. Expansion of broadband will be necessary
2. Ethical implications of Artificial intelligence
3. Encourage Development of Licenses for Communal Access to support Community Networks
4. Lower/eliminate barriers for registering Fintechs such as CBK Licenses.
5. Continued engagements on data protection issues not only from the Data Protection Act but also from the angle of taxation.

Moving Forward

Members of the Committee noted that the issues raised by the Sector will be considered by the Committee in their meetings as well as in the meeting that the Committee will hold with the President of Kenya. The Sector was also advised that it is important for them to prioritize key issues that the Committee can work on within the next 18 months or so before parliament is dissolved.