Uganda’s Social Media Tax Threatens Internet Access, Affordability

By Juliet Nanfuka |

Uganda’s president Yoweri Museveni has directed the finance ministry to introduce taxes on the use of social media platforms. According to him, the tax would curb gossip on networks such as WhatsApp, Skype, Viber and Twitter and potentially raise up to Uganda Shillings (UGX) 400 billion (USD 108 million) annually for the national treasury. The ministry has already proposed amendments to the Uganda Excise Duty Act, 2014 to introduce taxation of “over-the-top” (OTT) services, and raise taxes on other telecommunications services.

Section 4 of the Excise Duty (Amendment) Bill 2018, a copy of which was obtained by CIPESA, states: “A telecommunication service operator providing data used for accessing over the top services is liable to account and pay excise duty on the access to over the top services.” The amendment defines such services as the “transmission or receipt of voice or message over the internet protocol network and includes access to virtual network; but does not include educational or research sites which shall be gazetted by the Minister.”

According to the proposals, which could take effect on July 1, 2018, OTT services that commonly include messaging and voice calls via Whatsapp, Facebook, Skype and Viber will attract a tax duty of UGX 200 (USD 0.05) per user per day of access. In his letter, Museveni said the government needed resources “to cope with the consequences” of social media users’ “opinions, prejudices [and] insults”. He proposed a levy of UGX 100 (USD 0.025) per day per OTT user. Prime Minister Ruhakana Rugunda supported the suggestion as did the ICT minister, who stated that the taxes were meant to increase local content production and app innovation in Uganda.

If implemented, the proposed tax will be the latest in a series of government actions that threaten citizens’ access to the internet. Last month, the communications regulator issued a directive calling for registration of online content providers and also released tough restrictions on registration of SIM cards. At the USD 0.05 per day suggested by the finance ministry, a Ugandan user would need to fork out USD 1.5 per in monthly fees to access the OTT services. That would be hugely prohibitive since the average revenue per user (ARPU) of telecom services in Uganda stands at a lowly USD 2.5 per month.

According to the Uganda Communications Commission (UCC), in the 2016-2017 financial year, Uganda’s telecommunications sector contributed UGX 523 billion (USD 141.2 million) to national tax revenue, an increase of 14.3% from the previous year’s UGX 458 billion (USD 123.6 million).

As of September 2017, Uganda had an internet penetration rate of 48% while the mobile subscription stood at 65 lines per 100 persons. Research shows that at least one in nine internet users in the country is signed up for a social networking site, with Facebook and WhatsApp the most popular.

Indeed, social media and by extension OTT services, are key avenues for public discourse, service delivery and political engagement. As per the recently released results of the national IT survey 2017/18, 92% of MDAs have a social media presence with most using Facebook, Twitter and WhatsApp as their primary platforms for information dissemination and engagement with citizens. Meanwhile, telecommunications companies have tapped into the popularity of OTTs by offering competitive social media data packages, resulting in what was popularly referred to as “data price wars.”

The amendment bill also proposes a 12% tax for airtime on cellular, landline and public payphones. The latter two previously attracted a 5% tax. The tax on mobile money transfers has been increased from 10% to 15%, while a 1% tax has been introduced to the value of mobile money transactions of receiving and withdrawals.

The proposed taxes do little to support internet affordability in Uganda, which already scores poorly on the Affordability Drivers Index (ADI) that annually assesses communications infrastructure, access and affordability indicators. Currently, 1GB of mobile prepaid data in Uganda costs more than 15% of the average Ugandan’s monthly income. This is much higher than the recommended no more than 2% in order to enable all income groups to afford a basic broadband connection.

The proposed taxes have also raised considerable debate among members of civil society and the business sector, who are concerned that consumers will inevitably be economically affected, while the legal fraternity has called the move unconstitutional. In a country where two social media shutdowns were ordered in a space of three months during 2016, and where some social media users have been prosecuted or arrested over opinions expressed on Facebook and Twitter critical of public officials, these developments are particularly worrying. Already, the perceived high level of surveillance has forced many Ugandans including the media, into self-censorship, turning them away from discussing “sensitive” matters of community or national importance.

The increasing popularity of social media enabled OTT services, brings new regulatory challenges for governments, as many of these services have not required a licence or been required to pay any licensing fee according to the Electronic Frontier Foundation (EFF). However, the regulation of OTT platforms and services may in some cases adversely affect user rights.

On the financial inclusion front, the proposed taxes are also likely to affect mobile money subscriptions and the cost of doing business. In Uganda and across Africa, mobile money has become the primary means of financial transactions, offering new opportunities for productivity and efficiency gains to governments, businesses and individuals.

Feature photo by GotCredit

 

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