The Uganda government has slammed new taxes on users of social media platforms such as WhatsApp, Facebook, Twitter, Skype, and Viber in order to stop what President Yoweri Museveni has called lugambo (gossip).
“I am not going to propose a tax on internet use for educational, research or reference purposes, these must remain free.”Museveni wrote. Unfortunately, the president did not explain how lugambo has affected resource mobilization.
These proposals have been condemned by human rights activists, social media users and opposition leaders who see this as “diversionary, deceptive, injurious to individual freedoms and burdensome”.
According to Business Daily Africa, these proposed tax measures were ordered by the president in a letter dated 12th of March to Finance Minister, Matia Kasaija. These proposed tax measures are expected to help Museveni’s government raise between Sh400 billion ($108.55 million) and Sh1.4 trillion ($379.9 million) from social media users annually.
Museveni also wrote about the so-called “over-the-top” platforms (OTTs)— such as WhatsApp, Skype Viber, Twitter, etc “If we were to introduce a small fee of Uganda Sh100 per day from sim-cards that are used by these OTTs, that would generate about Sh400 billion ($108.55 million) additional revenue.”
In order to widen the tax base in the 2018/19 budget, Museveni has also proposed new taxes on telephones data transmission and the housing sector, which he says generates rented incomes but are not adequately taxed.
The government is proposing a new tax bills and the president added that “the big losses on telephones are in three areas: not collecting excise duty on airtime and only collecting VAT, missing many calls because you depend on false declarations by telephone companies and not taxing voice conversations and other non-educational communications over the internet (via WhatsApp, Facebook etc). Why not put excise duty on (internet) air time?”
However, Telecoms companies have rejected the tax proposals which they see as “double taxation” and uncalled for.
The general manager of corporate service in MTN Uganda, Anthony Katamba according to Monitor denied claims that telecom companies falsify declarations. He cited calls from Britain where MTN has to bill the British Telecom, and asked, “If I under declare, then how will MTN get its money from British Telecom.”
On taxation, Katamba said “the Uganda Revenue Authority (URA) assess us for tax based on the minutes used, you cannot hide that. If you chose to under declare, how do you gain by hiding the minutes? It’s not possible because MTN has to bill another entity for the minutes.”
He also told the Monitor that imposing excise duty on social media is taxing content, “the data you buy gives you internet. So taxing social media is taxing content,” Katamba said, adding that if the government goes ahead to implement the proposed tax, “it would be unprecedented.”
In a Business Daily report, a senior official from Uganda Telecom, who requested not to be named, backed the president and accused URA and Ministry of Finance officials of sleeping on the job. The official said that the URA has allowed telecom companies to take home a wider profit margin, denying government the billions of shillings needed to finance the budget.
Data from URA show that telecoms pay 18 percent VAT and 12 per cent excise duty on airtime for voice calls but only VAT on data yet mobile phone subscribers use more of data than voice. The telecoms companies also pay corporate tax, which is determined from the net earnings and two percent on gross earning to the regulator, the Uganda Communications Commission (UCC). Meanwhile, both VAT and excise duty are passed on to the consumers.
The Finance minister will by next week address the Parliament how his Cabinet took the decision to widen the tax base in order to finance government projects. Some of the MPs on the ICT and the Budget Committees of Parliament have asked the president and Kasaija to focus on the fight against corruption and other forms of financial indiscipline in government instead of taxing Facebook and WhatsApp.
The MPs cited a 2016 survey by the procurement authority that revealed the rising looting of public resources through inflated procurement deals and ranks key spenders such as Education and Defence ministries among the worst ‘thieving’ government agencies.
The “performance results and corruption perceptions in public procurement” survey carried out by the Public Procurement and Disposal of Public Assets Authority blames corruption in procurement on “political meddling in the procurement processes”, impunity and a decadent culture that adores wealth accumulation.
The World Bank in 2015 estimated that Uganda loses more than $300 million through corruption and procurement malpractices every year.