Uganda’s Social Media Tax is here to stay

Uganda’s Social Media Tax is here to stay
In Mobile-money, Tax, Telecommunications, Uganda

Government says more sites may be added to the tax scheme, but it will work on giving users more options for payment.

In July, Uganda’s government implemented a social media tax that it said was aimed at raising revenue that would be able “to cope with the consequences” of social media users’ “opinions, prejudices [and] insults”.

Parliament passed the Excise Duty Act (Amendment) Bill 2018 in May, which stipulated a mandatory fee of USD 0.05 per day of access (UGX 200) for use of messaging and voice calls over the internet.

Thus far, 56 apps fall under the OTT tax. These include dating apps, operating system-specific apps like Facetime for iPhone and BBM for Blackberry, job seeking network LinkedIn and the country’s two most popular platforms, Facebook and WhatsApp.

The Over-The-Top” (OTT) tax would also apply to Virtual Private Network (VPN) access but would exclude “educational or research sites prescribed by the Minister by notice in the Gazette.”

VPN access was used by tech-savvy citizens in the wake of two previous social media shutdowns, to overcome government’s ban and remain online. The avenue, however, is data-heavy and out of the reach of a majority of the population.

Abdusalam Waiswa, Uganda’s Communications Commission (UCC) director for legal affairs said: “The process (of restricting VPN access) is continuous and will keep going on. The only problem is even when we block them (VPNs), others keep coming up. And they are also operating from outside Uganda. So, it is hard to know who they are.”

The Excise Duty Amendment Act demands that users must pay a 1% tax on the value of every mobile money transaction made. This, in addition to the OTT tax already charged. Further adding to the cost of telecommunication is a tax on airtime for cellular, landline, and public payphones that increased from 5% to 12% and an increase on the tax on mobile money transfers which was raised from 10 percent to 15 percent.

Government has created daily, weekly and monthly payment plans for users. It is presently working on an annual payment system as well.

Revenue projections have indicated that up to USD 131 million (UGX 486 billion) could be collected annually by 2022.

Meanwhile, lobby groups have challenged the constitutionality of the law, appealing to the UN Human Rights Commission: “In a context in which social media has served as many users’ initial entry point to the internet, this tax could negatively impact the affordability and broader use of the internet, particularly by low-income Ugandans, as well as stifle freedom of expression, association, and assembly online.”

Research data provided by the National Information Technology Authority in Uganda from September 2017 revealed that at least 48 percent of the country’s 41 million citizens are online. At least one-in-nine internet users have a social network account, with Facebook and WhatsApp being the most popular choice.

Patrick Mugalula of LEX Africa Ugandan member firm, Katende Ssempebwa and Co, advised, “another issue to keep in mind is that due to public outcry, a Government statement was issued and communicated to the public by the Minister of Finance that the mobile money transaction tax of 1% would only be collected on sending transactions [transfer] of mobile money to another user/non-user and not on depositing or receiving transactions. This policy has been implemented through a directive issued to the URA [not in our possession at the moment] and to the Telecom operators while the Government finalises an amendment act to formalise the directive.

So far major player, Airtel Uganda Limited has issued a refund of the collected 1% mobile money transaction tax in respect to past receipts and transfers of mobile money.”

Article compiled by Katende Ssempebwa & Co a Lex Africa Member