The government has proposed a number of changes to the 2023 Finance Bill that has had many people talking. The measures in the finance bill aim to widen the government's revenue base; and a proposal for the government to tax payments made to digital creators has been included in the Bill.

A proposed 15% withholding tax on income made by content creators and artists has been made in the 2023 Finance Bill. The proposed 15% tax is projected to have a substantial impact on the country's artists and content creators. The tax is intended to increase revenue collection from digital platforms such as social media, e-commerce sites, and online marketplaces.

If passed, this tax will have a number of consequences for artists and content creators. But first, let’s break down the content creation landscape in Kenya and what digital content monetisation means, then we can proceed to see how this will affect you as an artist or content creator.

The Kenyan Content Creation Landscape

The demand for content has grown over time in the country, and many content creators now rely on sponsored content, online advertising, or ad money from platforms such as Facebook, YouTube, Instagram, and TikTok to make ends meet. 

Currently, certain digital payments are subject to withholding tax under the taxation framework specified by the Income Tax Act (ITA), while others may not be. The new proposed legislation will impose a 15% withholding tax on payments made by taxpayers to digital content creators.

What Does Digital Content Monetisation Mean?

Several types of content and services have been added to the concept of digital content monetisation.

Monetizing digital material often includes charging for any form of electronic content, including entertainment, social, literal, artistic, educational, and more. This can take many forms, including brand-sponsored advertising on websites, social media platforms, or other networks, as well as brand endorsements.

Sponsorship is another concept in which a brand owner pays a content creator to create and promote their content.

The proposal also advises that the new tax be collected through affiliate marketing, in which a content creator receives a commission if their audience clicks on the displayed product.

If approved by the President, these new taxes will go into effect on September 1.

What impact will the 15% tax have on artists and content creators if it is passed?

Artists and Content Creator’s Income

One of the primary concerns is that the tax will deter artists and content creators from selling their work on online platforms. This is due to the fact that the additional cost of the tax would have to be reflected in their product pricing, making them less competitive in comparison to content creators from countries where such taxes are not applied.

To begin with, the tax will reduce the amount of money that artists and content providers get from their work. Many content creators and artists rely on revenue from their online content and brand endorsements to make a living.

However, if a 15% withholding tax is imposed, their income may be drastically reduced, making it more difficult for them to make ends meet.

This tax will also impose an additional financial strain on artists and content creators, possibly lowering their earnings. Most Kenyan artists and content creators rely significantly on internet channels to market and sell their work, and the proposed levy could reduce their earnings on these platforms.

This could be especially difficult for budding artists and content creators who are just getting started and trying to develop their industry presence.

Creativity and Innovation in the Country

If the tax is passed, it could potentially have a detrimental effect on creativity and innovation. Artists and content creators depend on the income generated from their work to sustain their personal lives and fund future projects, which in turn allows them to continue producing valuable content.

However, if their revenue is lowered as a result of the withholding tax, they may be driven to reduce the quality or amount of their labour. This can result in a decline in creativity and innovation in the industry.

Finally, the tax may also reduce the number of artists and content providers in Kenya. With lower earnings and fewer investment prospects, some artists and content creators may choose to exit the industry entirely, which might have long-term consequences for the growth and development of Kenya's creative industry.

Investments in the Creative Sector

The 15% withholding tax may deter investment in the creative sector.

Kenya's creative economy is still growing, and investment in this area is critical to its future success.

Yet, if the government applies a 15% withholding tax, investors may be discouraged from participating in the industry because they may not receive the expected returns. This, in turn, could cause the creative economy to slow down even further.

Parting Shot:

In the face of the proposed 15% tax on artists and content creators, the future of creativity and innovation in Kenya hangs in the balance. The potential consequences of this tax are far-reaching. Not only will it reduce the income of artists and content creators, making it harder for them to sustain their livelihoods, but it may also stifle their ability to produce high-quality work. Moreover, the tax could lead to a decline in the number of artists and content creators in the country, posing a threat to the growth and development of Kenya's vibrant creative industry. Additionally, the imposition of this tax might deter much-needed investment in the creative sector, further impeding its progress. As the decision looms, it is crucial for policymakers to consider the long-term implications and seek alternatives that foster the flourishing of artists and content creators, nurturing a thriving creative ecosystem in Kenya.