Uganda's Social Media Tax Undermining Covid-19 Fight

By Juliet Nanfuka |

Globally, in the wake of the outbreak of coronavirus disease (COVID19), social media has played various roles, such as  filling information vacuums and providing channels for citizens to demand accountability and transparency. In Uganda, the government and other agencies have utilised social media as one of the avenues for disseminating information to citizens, including providing status updates on confirmed cases, as well as running public health and safety campaigns. 

However, the effectiveness of social media to reach a wider audience in Uganda has likely been undermined by the social media tax, which the finance ministry introduced in July 2018. The tax on so-called Over-the-Top (OTT) services requires  telecom subscribers to pay a daily subscription in order to access popular social media platforms, such as Facebook, Twitter, Instagram and WhatsApp. 

Despite several requests to suspend the tax during the pandemic, the government has upheld it, thereby  excluding segments of the population from easily accessing information and resources via the taxable platforms. Last month, the Speaker of Parliament joined the chorus of those urging the suspension of the tax so as to aid the fight against the pandemic. Her call rode on the revelation by the tax authority that the OTT tax had dismally failed to raise the revenue earlier anticipated, and admission from the minister for information and communications technology that the tax needed to be rethought.

Uganda’s internet penetration stands at 38%, but with research indicating that many subscribers have more than one internet subscription, the proportion of citizens that use the internet could be much lower than 38%. A key challenge is cost. An average Ugandan telecom subscriber spends UGX 10,500 (USD 2.8) per month on voice, SMS and data, yet  access to social media for a month costs an additional USD 1.6 as OTT tax.

Indeed, multiple and high taxation on digitisation remains a stumbling block to increased inclusion not only to basic social media access but also for mobile money usage, digital banking, and access to public e-services.

While all forms of communication including radio, television and in some cases, loudspeakers are playing vital roles in keeping citizens informed on Covid-19, social media is providing a valuable channel for reporting public health gaps, encouraging transparency, accountability, clarification and case monitoring – yet its reach is limited by the OTT tax.

In the early stages of Uganda’s lockdown, it was through social media posts of academic and satirist, Dr. Spire Ssentongo, that many citizens learnt of the cracks in the states’ quarantine processes, such as the forced excessive accommodation prices for quarantined individuals, and the continued public operations of hotels that had been designated as gazetted quarantine centres. Many others also took to social media to share their experiences and the Ministry of Health was forced to respond to these concerns.

Meanwhile, opposition Member of Parliament Robert Kyaluganyi used his social media platform to launch an educative music video on the pandemic in March, and within 10 hours of its release it had garnered more than 700,000 views. He later tweeted that he had  numerous requests for authorisation for the song to be played on television and radio stations.

At government level, some key ministries are struggling with the optimal utilisation of their social media platforms and basic information availability on their websites. For instance, the Ministry of Education and Sports website has no information related to how the education sector should cope with the pandemic. Instead, a series of tweets were made through the account of the ministry’s head, Janet Museveni, pointing to a PDF which details some measures the ministry is undertaking, none of which make any reference to the use of technology or have any indication of where the suggested educational content could be found online.

Yet some entities have showed how technology is aiding their efforts to combat Covid-19. Among them was a tweet by the  Uganda Revenue Authority (@URAuganda) highlighting how investment in the Regional Cargo Tracking System (RCTS) had helped to intercept a truck driver who tested positive for Covid-19. The system was launched in 2017 to track goods under customs control from point of loading to a final destination within Kenya, Rwanda and Uganda.

Back in 2017, the government launched the Uganda Digital Vision,  a national policy and strategic framework to guide the country’s digital transformation and provide a unified direction for ICT development. With the social media tax undermining access to digital information and services, and key ministries failing to leverage digital technologies in providing critical public services, the Digital Vision does not seem to be delivering well on its promises.


How Social Media Taxes Can Burden News Outlets: The Case of Uganda

By Juliet Nanfuka |
In July 2018, the government of Uganda implemented a tax on individual users of social media platforms. In the first three months following the introduction of the tax in the country, internet penetration dropped from 47 percent to 35 percent. Given that a significant amount of news circulation now happens via social media and messaging apps, how might this new tax impact the news media ecosystem? The negative effects on news media are less direct and arguably more pernicious than might be expected.
See the full report published on the Center for International Media Assistance (CIMA) website as part of the Open Internet for Democracy Leaders Initiative.

Social Media Tax Cuts Ugandan Internet Users by Five Million, Penetration Down From 47% to 35%

By Juliet Nanfuka |

The tax which the Uganda government introduced on use of social media last July has slashed the number of internet users in the country by five million in three months, according to figures from the industry regulator, the Uganda Communications Commission (UCC). The numbers also show that revenue from the tax is far from the windfall which government had predicted the tax would add to the national treasury.

The figures released by the commission show that only half of the country’s internet subscribers were paying the Over-The-Top (OTT) service tax in the third month after its introduction. Those paying the tax fell from eight million subscribers in July to 6.8 million in September. In June 2018, a month before the introduction of the tax, the internet penetration rate in Uganda stood at 47.4% (18.5 million internet users) but three months later, it had fallen to 35% (13.5million users).

Monthly revenue from the tax was equally on a downward trend, falling from Uganda Shillings (UGX) 5.6 billion (USD 1.5 Million) in July 2018, to UGX 4.09 billion (USD 1.1 Million) in August 2018 and further to UGX 3.96 billion (USD 1.08 Million) in September 2018.

The figures from the UCC  suggest that many internet users may have stopped accessing the internet altogether since July. But they also reflect the growing number of Ugandans who are using virtual private networks (VPNs) as a means to continue accessing social media while avoiding to pay the daily  OTT tax of UGX 200 ( USD 0.05).

The figures from the regulator appear to confirm the fears expressed by many upon the introduction of the tax, that it would harm the sector by undermining internet access and affordability, while also threatening access to information and freedom of expression.

Upon the introduction of the social media taxes last July, the government had anticipated revenue collections of up to UGX 400 billion (USD 108 million) per annum, while projections from the June 14 national budget speech for the fiscal year 2018/19 had projected that up to UGX 486 billion (USD 131 million) could be collected annually by 2022. 

Earlier this month, Uganda’s ICT minister Frank Tumwebaze hinted that his ministry may have been misled by the finance ministry  into supporting the tax on the assumption that it would widen the country’s revenue base. Accordingly, parliament’s committee on Information and Communication Technology (ICT) ordered the ICT ministry to conduct an assessment on the impact of the social media tax and share their views with the finance ministry.   

Earlier studies forecast the negative impact of the tax. The Alliance for Affordable Internet (A4AI) said the tax would likely push basic connectivity further out of reach for millions, as it would disproportionately and negatively impact low-income Ugandans and their ability to affordably access the internet. It explained that, where the richest Ugandan would experience an increase of 1% in their cost to connect, this cost to connect for Uganda’s poorest would jump by 10%, resulting in just 1GB of data costing them nearly 40% of their average monthly income. According to the World Bank, the average national income stands at USD 630 per annum. 

According to the  2017/18 Uganda National Information Technology Survey, social media platforms are some of the popular avenues for citizens to engage with each other, and to  pursue businesses and education opportunities. At least 76% of the survey respondents cited the price of internet subscription as a key limitation to their internet use. This was followed by concerns over slow internet speeds and the lack of connectivity in some areas.

Image: Internet use limitations in Uganda | Source: 2017/18 Uganda National IT Survey

A study by Research ICT Solutions warned that the OTT tax could lead to lower tax revenues including costing up to UGX 2.8 trillion (USD 760 million) in forgone GDP growth and UGX 400 billion (USD 109 million) in taxes per year. The study argued that removing all excise duties across the ICT sector would lead to more tax revenues by facilitating economic growth and growing tax revenues across all sectors. It added that the more Ugandans that have broadband access, the easier it will be to serve them with e-governance, e-health, e-education and financial services while also growing tax revenues faster.

At an August 2018 multistakeholder meeting hosted by the Collaboration on International ICT Policy in East and Southern Africa (CIPESA) and the Internet Society Uganda Chapter, stakeholders called for the government to reassess its position on the taxation to ensure a more inclusive financial economy and digital society that does not discriminate or disenfranchise already marginalised and vulnerable communities, including persons with disabilities (PWDs), women, youth and rural communities. Participants at the meeting stressed that the government should instead look at available alternatives for raising government revenue without necessarily taxing citizens and suffocating Uganda’s nascent digital economy.

A study released by Pollicy indicated that many social media users have found the OTT tax frustrating  despite 56% of respondents indicating that they pay the tax compared to the 38% who opt to utilise VPN and the 3% who  access social media platforms through free Wi-Fi. 

Zambia Introduces Daily Tax on Internet Voice Calls

By Daniel Mwesigwa |
The government of Zambia is set to introduce a daily levy of 30 Ngwee (USD 0.03) on internet voice calls. In a press statement issued after a cabinet meeting on August 12, 2018, the government spokesperson said internet calls through platforms such as Viber, WhatsApp and Skype “threaten the telecommunications industry and jobs” in licenced telecom companies such as Zamtel, Airtel and MTN”.
Accordingly, the cabinet approved the issuance of a Statutory Instrument to “facilitate the  introduction of the tariff to be charged through mobile phone operators and internet providers.” In justifying the introduction of the levy, the government spokesperson cited research which showed that “80 percent of the citizens are using WhatsApp, skype, and Viber to make phone calls.”
The statement did not indicate when the statutory instrument would be introduced, or when the levy is anticipated to take effect. The new tax, according to reports quoting the communications minister, was expected to fetch USD 22 million annually.
The proposed levy adds to Zambia’s mixed record on ICT access and freedom of expression online. The Zambia Information & Communications Technology Authority (ZICTA) reports a mobile phone penetration rate of 81.9% and mobile internet penetration rate of 47.1%. However, mobile and internet proliferation is threatened by high costs of access, a digital divide between men and women and between rural and urban areas. Quality of service also remains poor as evidenced by the recent fines slapped by ZICTA on the three leading telecommunications service providers.  
The Media Institute of Southern Africa (MISA) Zambia Chapter and a collective of bloggers have expressed deep concern about the tariffs on internet calls. They asked government to shelve the plans to introduce the tariff and to instead undertake efforts to promote affordable internet access. They argued that the “underlying objective” of the tariff is to “stifle free expression of millions of Zambians who increasingly depend on online tools to communicate.” They added that it is a “threat to entrepreneurship and innovation as many youths and citizens are using internet platforms to advance their socio-economic activities.”
Meanwhile, the Zambian cabinet has also approved the introduction of the Cyber Security and Cyber Crimes Bill that will repeal and amend provisions of the Electronic Communications and Transactions Act No. 21 of 2009. The bill will purportedly “promote an increased cybersecurity posture, facilitate intelligence gathering, investigation, prosecution and judicial processes in respect of preventing and addressing cybercrimes, cyber terrorism and cyber warfare.”
In addition to facilitating the establishment of Zambia National Cyber Security Agency (ZNCSA), which is expected to serve as the “coordination centre for all matters related to cyber security at national and international levels”, the proposed law will also criminalise “computer-based offences and network-related crime in line with the Penal Code”. Furthermore, it will “provide for investigation and collection of evidence for computer and network related crime and also provide for the admission of electronic evidence for such offences” as well as “adequately deal with various crimes committed using social media platforms.”
Zambia’s move  becomes the latest in a string of steps taken by African governments to undermine internet access and affordability, and weaken the potential of the internet and related technologies to promote free expression, access to information and civic participation. In March 2018, Uganda’s communications regulator issued a directive requiring online content providers to register and pay an annual fee of USD 20. Shortly thereafter, in July 2018, social media taxes were introduced with users required to pay a daily levy of Uganda Shillings (UGX) 200 (USD 0.05) before regaining access to social media platforms which were blocked.
In neighbouring Tanzania, online content service providers and producers have to pay over USD 900 to register with the state for permission to maintain their platforms, according to new 2018 regulations. Meanwhile, in the Democratic Republic of Congo, in mid June, the ministry of communications issued a decree giving online media outlets a month to comply with new regulations or face harsh penalties.

Why Uganda’s Government Should Take a Different Path to Social Media and Mobile Money Taxation

Statement |
There has been widespread concern over newly introduced levies on social media access and mobile money transactions in Uganda, which are widely considered a threat to internet access and affordability, as well as to freedom of expression and access to information. The effects of the taxes that took effect on July 1, 2018, were the focus of discussions at a recent stakeholder dialogue  organised by the Collaboration on International ICT Policy for East and Southern Africa (CIPESA) and the Internet Society Uganda Chapter.
At the dialogue, entrepreneurs, journalists, lawyers, activists, technologists, and academics shared their perspectives and experiences, resulting in a set of recommendations to the government on alternatives to the current modes of taxation.
The government says the taxes are needed so as  to expand the country’s tax base. In the 2018/2019 national budget speech, the finance ministry estimates that up to UGX 486 billion (USD 131 million) could be collected annually by 2022 from taxes on social media Over-The-Top (OTT) services.
However,   presenting early results on an ongoing study on the impact of the taxes, Dr. Christopher Stork of Research ICT Solutions stated that the country’s rural-based users of social media and mobile money will be hardest hit by the taxes, increasing the percentage of the unconnected and resulting in decreased revenue for telecom/ internet operators. He said this would ultimately lead to reduced growth in the gross domestic product (GDP) and hamper job creation.

Image above: Comparison of taxes against average income across regions in Uganda | Source:  Research ICT Solutions

Image above: Prepaid products user tax burdens | Source:  Research ICT Solutions
This study’s preliminary results affirm earlier contentions, such as by the After Access researchers, that those who marginally afforded internet services before the taxes were introduced are likely to now find internet use totally unaffordable, thereby increasing the percentage of the unconnected.
Meanwhile, Dr. Abdul Busuulwa, Executive Director at Community Based Rehabilitation (CBR) Africa Network, said whereas social media and mobile money platforms had eased the lives of persons with disabilities (PWDs),However, the increased cost of accessing these platforms due to the new taxes had reversed these  gains. He said platforms like WhatsApp were helping in disseminating critical information among people with hearing difficulties before the added cost of using social media rendered them unaffordable to members of these groups, who he said already faced challenges in finding employment and often relied on financial support from others.
The impact of the taxes on the use of online platforms for civic engagement on local governance was described by Samuel Mumbere, ICT Officer at the Kasese District Local Government in Western Uganda. According to Mumbere, whereas introduction of the taxes had prompted a rise in the use of Virtual Private Networks (VPNs) by community members who needed to maintain avenues of social accountability and access to information in the district, many were concerned about the additional costs related to data usage by some VPN products.
On the access to justice front, the online legal knowledge and support platform, Barefoot Law, was cited as a social media-based service that had enabled citizens to access legal support and services which the poor are often excluded from due to financial constraints. Such platforms are also threatened with reduced use by citizens due to the taxes.
Those in e-commerce cited barriers to accessing their clients, and reduced competitiveness of their products and services, due to the taxes. The Managing Director of Jumia Uganda noted that the company’s work with some 3,000 different sellers, 1,000 hotels, and over 200 restaurants had experienced strained operations as their operations relied greatly on social media.
Although the mobile money transactions tax is under review, with a new bill tabled before parliament proposing to reduce the tax from 1% to 0.5%, this does little to address the impact the tax will still have on financial inclusion. Feminist and writer, Edna Ninsiima, highlighted the role that mobile money has played in empowering unbanked women. She said the new transaction fees are affecting the financial independence of women – including building a savings culture – where it had been growing steadily.
Meanwhile, Kojo Boakye, Public Policy Manager, Access and Connectivity, Facebook, cited the counter impact of the taxation on digital dividends including efforts to extend connectivity and broadband penetration. He questioned the likelihood of the tax raising the projected revenue, adding that  the tax could also have an impact on the investment decisions of investors in infrastructure. In 2017, Facebook, in partnership with Airtel Uganda and Bandwidth and Cloud Services (BCS) Uganda announced  a USD 100 million project to lay nearly 800 km of fibre optic cable in north-western Uganda. Like Facebook, Google has also worked to extend connectivity in Uganda with infrastructure investments including a wifi project in the capital, Kampala.
Overall, participants at the dialogue pointed out that the taxes are not only discriminatory in nature but also disenfranchise already marginalised and vulnerable communities including PWDs, women, youth and rural communities. They called on the government to reassess its position on the taxes without inhibiting growth in ICT usage and innovation. The dialogue was also introspective with many noting that more proactive and collaborative efforts should be pursued by non-state actors, especially research and participating in consultative policy processes, to enhance informed decision-making by the government.