New Tax on Online Services A Threat to Internet Freedom in Mauritius

By Thomas Robertson |

Under the premise of Covid-19 austerity measures, the government of Mauritius passed a new tax on digital services in August 2020. The “Liability to Value Added Tax on Digital and Electronic Services” is one of the several amendments to the Value Added Tax (VAT) Act introduced in the July 2020 Finance Bill.

The Act defines “digital or electronic service” as any service supplied by “a foreign supplier over the internet or an electronic network which is reliant on the internet; or by a foreign supplier and is dependent on information technology for its supply.”

The penalties for failure to comply with VAT that are outlined in the original VAT Act (which are unchanged in the amendment that extended the tax to digital services) include a fine of up to 50,000 rupees (USD 1,255) or imprisonment of up to five years.

The digital VAT introduction is the latest in Mauritius’ move towards internet regulation that has already manifested in restrictions to freedom of expression through the Information and Communication Technology (ICT) Act and application of expanded surveillance technologies in tourist areas.

The Bumpy Legal Road to Mauritius’ Blossoming ICT Sector

 Mauritius’ economic success and a strong culture of democracy have allowed for the development of an emerging ICT sector. In 2019, the ICT sector contributed up to 5.8% to the country’s Gross Domestic Product (GDP) amounting to over 800 million US dollars. This is not surprising given that Mauritius has set out to be the world’s first Cyber Island and has fulfilled that goal by establishing Africa’s first Cybercity. Additionally, a conducive legal framework is in place, including laws on cybercrime, data protection, and ICT usage regulation and democratisation. Mauritius is also implementing a 2018-2022 Digital Government Strategy that aims to integrate technology into government operations and service delivery.

Nonetheless, there has been a series of regressive developments to which the online services tax now contributes. In 2018, a contentious amendment to the ICT Act was passed, which criminalised content perceived to cause “annoyance, humiliation, inconvenience, distress or anxiety to any person,” and established penalties of up to 10 years in prison. However, even before the amendment of the ICT Act, two internet users were arrested in 2016 following a complaint filed by a member of the Mauritian cabinet regarding their Facebook posts. One of the two users arrested in 2016, Farihah Ruhomaully, was arrested again in July 2020 after she called a Member of Parliament a “dirtbag” on Facebook. Both of these arrests were justified as responding to breaches of the ICT Act, indicating that the Act is enforced not just to prevent cybercrime, but also to crack down on dissent.

The ICT Act has also been used to criminalise the dissemination of false news as demonstrated by the arrest of a former government minister on allegations of spreading false information regarding the purchase of Covid-19 medical equipment. Meanwhile, there are reports of the involvement of the Mauritian government in the blockage of social media accounts of critics on grounds of national security.

In addition, the Mauritian government is one of several across Africa to institute a widespread surveillance apparatus. The Safe City project funded by Huawei will install a system of hundreds of closed circuit television (CCTV) cameras in the Port-Louis area purportedly intended to fight crime. This is troubling given Huawei’s reported collaboration with state police forces in Uganda and Zambia to target the political opposition.

Looking Beyond the Tax Act’s Impacts on Internet Affordability and Free Speech

Mauritius boasts relatively high internet access rates compared to much of sub-Saharan Africa – 59% internet penetration as of 2018, according to the World Bank and the International Telecommunication Union. The country is also ranked favourably in internet affordability by the Alliance for Affordable Internet (A4AI) Affordability Report: 13th out of 61 countries assessed worldwide and first in Africa.

Without a list of the range of digital services under the scope of the new VAT provisions, it is unclear which services will be affected, though Netflix and Google Drive are among the services speculated to be taxed. At 15% of the value of “digital or electronic services”, the levy will likely increase the price of affected services – putting them out of reach for many Mauritians. Indeed, similar VAT modifications on online services in Mexico and Chile demonstrate the effects of the increased tax burden on consumers.

With a strong history of democracy and rule of law, legislative constraints that stifle free speech online and expand surveillance show regression into authoritarianism. The introduction of VAT on online services resembles the likes of the Ugandan government’s social media tax and the Zambian government’s  tax on internet voice calls. The timing of the tax also seems peculiar given that many Mauritians are relying on digital services during the Covid-19 pandemic. Furthermore, digital platforms have recently been utilised to mobilise opposition against the Mauritian government’s response to the Wakashio oil spill, resulting in over 50,000 citizens participating in an anti-government protest in August 2020.

Thomas Roberston is a 2020 CIPESA Fellow focussing on digital expression and China-Africa relations.

Uganda Blocks Access to Social Media, VPNs and Dating Sites as New Tax Takes Effect

By Juliet Nanfuka |
As of midnight on July 1, 2018, telecom companies in Uganda blocked access to social media platforms for all users and required them to pay a newly introduced Over-The-Top” (OTT) tax before regaining access. The tax resulted from a March 2018 presidential directive for social media to be taxed to raise resources “to cope with the consequences” of social media users’ “opinions, prejudices [and] insults”.

“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.”

Joint oral statement to UN Human Rights Commission on Social Media Taxes by APC, CIPESA,  Derechos Digitales and WOUGNET

The directive proposed that up to UGX 400 billion (USD 108 million) per annum could be collected through the taxes. Projections from the June 14 national budget speech for the fiscal year 2018/19 indicated that up to UGX 486 billion (USD 131 million) could be collected annually by 2022. Earlier in May, Uganda’s parliament passed the Excise Duty Act (Amendment) Bill 2018, which introduced a mandatory fee of UGX 200 (USD 0.05) per day of use for services that include messaging and voice calls via Whatsapp, Facebook, Skype and Viber.

The tax will likely push basic connectivity further out of reach for millions. At the USD 0.05 per day, 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 just USD 2.5 per month.
According to the Alliance for Affordable Internet (A4AI), at the end of 2016, a 1GB mobile broadband plan in Uganda cost more than 15% of average monthly income. The A4AI further states that with the excise duty in place, this cost to connect for Uganda’s poorest will jump by 10%, resulting in just 1GB of data costing them nearly 40% of their average monthly income.
Section 2 of the Excise Duty Amendment Act provides that the tax will apply to “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.” The Uganda Revenue Authority (URA) has listed sites such as professional networking platform LinkedIn and dating sites such as Badoo and Tinder among those that would be accessed only upon payment. The government has not stated what constitutes educational or research sites.
As of September 2017, Uganda had an internet penetration rate of 48%, in a country of 41 million people. 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. The introduction of the tax has accordingly elicited strong opposition from users including the limitation of payment only through mobile money, Electronic Virtual Cash (EVC) or any electronic wallet.
The Excise Duty Amendment Act also introduced a 1% tax on the value of every mobile money transaction which users will also have to pay in addition to the OTT tax. The Act also raised the tax on airtime for cellular, landline and public payphones from 5% to 12% and increased the tax on mobile money transfers from 10% to 15%.

Some users are expressing frustration with having to pay twice – first the OTT tax, then the 1% tax on every mobile money transaction – in order to access social media and other blocked sites.
Many social media users have turned to using Virtual Private Networks (VPNs) to remain online and avoid the taxes. This is a similar stance to that taken during 2016, when Uganda had social media shutdowns on two occasions, leading to a surge in VPN use. However, access to some VPN sites – particularly free ones – has also been blocked and knowledge about VPN access and use is largely limited to tech savvy users. Further, there remains concern on the extent to which VPNs will be an affordable option due to their heavy data requirements.

A poll conducted by Daily Monitor newspaper on its Twitter handle showed that 19% of the 581 tweeps who participated would spend less time on social media, 11% would stop using social media, while 70% would resort to using VPN.
Further, imposition of the tax has consequences on net neutrality which requires that the Internet be maintained as an open platform on which network providers treat all content, applications and services equally, without discrimination. The tax effectively limits access to social media sites which are a primary entry point for many new users to the internet in developing countries including Uganda. Indeed, it is in social media platforms that many have found relatable local content including avenues for knowledge exchange, civic participation and economic opportunity.

Telecommunications companies had previously sought  to tap into the popularity of OTTs by offering competitive social medias data packages – such as such as MTNs SWIFT (Snapchat, WhatsApp, Instagram, Facebook and Twitter) and WTF (WhatsApp, Twitter, Facebook) – resulting in what was popularly referred to as “data price wars” that led to a drop in the price of access.
Meanwhile, the state also found value in the use of social media as an avenue for engaging with citizens and required all Ministries, Departments and Agencies (MDAs) to pursue a social media strategy to promote state-civic interaction which aimed at “improving effectiveness of communication, sharing of information and open engagement and discussions with the Public.” Results of the Uganda national IT survey 2017/18 indicated that 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.

Source: National IT Survey 2017/18

The Uganda government did not conduct any public consultations before introducing the OTT tax, which is testament to the absence of a multi-stakeholder model of internet governance that would enable the perspectives of diverse stakeholders to support more informed policy decisions. This tax comes on the heels of a directive last March by the communications regulator for registration of online content providers. Uganda is potentially setting a worrying trend for the region, as neighbours Tanzania and Congo have similarly issued stringent online content regulations that threaten citizens’ rights to privacy and freedom of expression and promote self-censorship.