The Ex­cise duty (Amend­ment) Act, 2018: A progress for Ugan­da’s econ­omy or an im­ped­i­ment to telecom­mu­ni­ca­tion?

By: Jacky Kemigisa

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.