Kenya’s Proposed Tax Bill Sparks Concerns Among Gig Workers

New Legislation Targets Kenya’s Growing Gig Economy

A controversial new bill introduced by Kenya’s National Treasury is causing alarm among freelancers, digital workers, and self-employed professionals across the country. The Business Laws (Amendment) Bill 2024 proposes significant changes to employment definitions that would bring gig workers into the formal tax system.

Expanded Definition of Employment

The bill broadens the definition of an “employee” to include anyone working for wages, whether remotely or on-site, even for short-term engagements. This sweeping change would subject many previously untaxed freelancers to statutory deductions similar to those applied to traditional salaried workers.

“Employee means a person who is employed for wages or a salary and includes an apprentice, indentured learner, and a person who performs his duties remotely or on-site within a business process outsourcing arrangement or an information technology-enabled service.”

Impact on Kenya’s Informal Workforce

The proposed legislation would affect various professionals including graphic designers, musicians, taxi drivers, and construction workers. The bill also requires companies engaging freelancers to provide necessary tools and equipment, potentially increasing operational costs that may be passed on to workers.

Case Study: A Freelancer’s Struggle

George Kamau, a 27-year-old freelance graphic designer from Roysambu, exemplifies the challenges facing gig workers. Earning between Sh15,000 and Sh30,000 monthly with fluctuating income, Kamau questions the timing of the proposed taxes: “Sometimes you go a whole week without a job. Now the government wants to tax what little we have left?”

Government’s Revenue Expansion Strategy

Treasury Cabinet Secretary John Mbadi has defended the move as part of efforts to broaden Kenya’s tax base without increasing rates on existing taxpayers. The government aims to tap into previously untaxed income streams, including rental properties which currently contribute only 17% of total tax revenue.

“There are many Kenyans out there who are very capable of paying taxes, but because they are not visible, they are not paying.”

Potential Economic Consequences

Economists warn that reducing gig workers’ disposable income could depress consumer spending, potentially weakening demand across multiple sectors. The bill’s requirement for employers to provide equipment may also discourage companies from hiring freelancers, further impacting Kenya’s growing gig economy.