ICT Cabinet Secretary Joe Mucheru has challenged the Communications Authority of Kenya to evaluate modalities through which it can impose penalties to reduce foreign production of commercials and incentivize the creation of adverts locally.
This means that multinational firms with local operations might in future have to produce their adverts locally or pay a premium to air them on the local channels. Auditors at PWC have estimated the media and entertainment industry to be worth Sh200 billion in 2019 and could go up to Sh300 billion in 2022, yet the industry has been starved off investments, according to the Kenya Film Commission, which has proposed tax credits and rebates to spur its development.
“Adverts are being done outside the country and they are brought in to Kenya in flash disks and these companies do not pay taxes. We have had discussions and we now need to start implementing airing tax for these adverts. The firms who are producing the adverts locally, they are hiring people and paying taxes yet they are being penalized when people take all that money to other countries,” he said.
Charges imposed on producing commercials locally is driven by various national and county government taxes, which has discouraged by many firms to make adverts in Kenya while the cost of producing an advert locally has driven local firms to make commercials in other markets.
In so doing these multinational companies take advantage of economies of scale when working with their sister companies in other markets and presenting a single advert that is aired across different countries. As much as firm producers have to go to various regulators to secure clearance, the issue of regulation and taxation becomes another challenge.