The parliament of Uganda on May 30ththis year passed the Excise duty (Amendment), Bill 2018 which among other things involved amending Section 4 of the Excise Duty Act, 2014 by including sub-section 5 which provides that a telecommunications service operator providing data used for assessing over the top services is liable to account for and pay excise duty on the access to the over the top services. It also involved the amendment of the Schedule 2 to the principal Act by substituting for item 13 where for the access of overtop services one is to pay Ugx.200 per day effective 1stJuly this year. According to this Act, “over top services” means the transmission or receipt of voice or messages over the internet protocol network and includes access to virtual private networks but does not include educational or research sites prescribed by the Minister by notice in the Gazette.
What are the possible gains?
The chief source of revenue for the government is through taxes. According to media reports from the UCC, there were over Ugx.17.1 million internet users registered with telecommunication companies in Uganda which in my opinion is a wider tax base for the economy. Collecting Ugx.200 per day from Ugx.17 million subscribers is equal to Ugx. 3.4 billion per day, which amounts to Ugx.102 billion per month and Ugx.1,224 billion per year on the assumption that these subscribers use internet on a daily basis. Though Ugx.200 appears too little money according to the government, it will result in such a bigger contribution if the internet subscribers pay it.
This revenue when generated could translate into better social services such as education, healthcare, transport and among others. By all means, no one would want to pay any tax if given an opportunity to dodge it, however, we all need better service delivery which we can only get if there is money in the government treasury.
Uganda’s budget for so long has over-relied on borrowing which I believe affects the economy adversely in a way that we pay back the loans with high interest rates. It is high time the country focused on internal sources of finances one of which is widening the tax base.
What are the possible negative implications of the Act?
United Nations recognizes information access as a fundamental human right. This under Article 19 of the Universal Declaration of Human Rights (1948), which states that the fundamental right of freedom of expression encompasses the freedom to “to seek, receive and impart information and ideas through any media and regardless of frontiers”.Taxing social media and the internet may constrain the means of communication and information access.
Social media has been integrated into our day-to-day means of communication. It is almost attaining an official status of communication because, in many organizations, employees have Whatsapp groups and other social media platforms where vital information regarding work is channeled.
The majority users of social media are the youth and as we are aware the largest portion of the youth are unemployed. The question paused here is; which type of taxation are we employing in this move to tax social media? Could it be progressive or regressive taxation? Social media is the way most of the youth access information if it becomes costly to access, this policy may disempower the youth instead of empowering them.
Developed nations such as Us, UK and Germany have made efforts to ensure that access to the internet is more easy and cheaper for the citizens. The rationale behind this is that an informed citizenry is an empowered one and information is key to development.
The Act stipulates that access to educational and research sites shall not be taxed, but this not clear and seems to be ambiguous since there some of these sites on social media. For instance, there are links and pages for research on Facebook and Twitter and other social media platforms that promote research and education.
If one wants to access Facebook or Twitter to read some information from research page/ link, for instance, World Bank data on Facebook, he/she will still be charged Ushs 200 because the service provider will not know why this person is longing in on his/ her twitter/ Facebook account.
Charging an internet user Ugx. 200 per day implies Ugx. 6000 a month which translates into about Ugx.72,000 a year on top of data subscription charges. This implies that some internet users will not find easy to access the internet regularly because of the additional costs hence curtailing their right to information access.
Some individuals make various data subscriptions in a day, if the fee is charged at every point of data subscription, this is going to be double taxation.
Another challenging issue which is on how shall the internet users who use Wi-Fi (wireless internet for example that provided by the organizations to employees, schools to students) be taxed.
If the organization offers Wi-Fi to its members, they are free to use it for any internet services including social media. So who will pay the tax in this case? Does this imply that users will have to first pay the tax and then be able to use Wi-Fi for social media?
Literally, the idea to raise revenue through taxing social media is a lucrative one because of the many millions of internet subscribers in Uganda; but we need to be cautious of its negative implications such as denying the people a right to information access. In my opinion, there is a need for thorough cost-benefit and social-impact analyses before this policy is implemented.