The 12 per cent tax on mobile data in Uganda will be approved

Finance Minister Matia Kasaija tabled before parliament on 1st April 2021 11 bills one of which included the 12 per cent tax on mobile data in Uganda. The proposal of this new tax under the Excise Duty (Amendment) Bill 2021 came with the suggestion to scrap the controversial Over The Top (OTT) tax which is currently imposed on social media platforms.

Also read: Why absurd OTT tax should be scrapped completely.

It looks like Ugandans are paying the new internet tax, that means that all Internet services are subject to this tax. Unlike the OTT tax that only covered social media, this tax will be imposed on full internet usage. However, according to the audit firm, PricewaterhouseCoopers, the Bill proposes exclusion for data used for the provision of medical and education services.

Ugandans are yet to find out how the government will implement this tax while maintaining the said exclusions. The social media tax that was introduced in 2018 caused such an uproar among members of the public in their various capacities as many referred to the tax as unfair and unnecessary.

With the abolition of OTT comes the 12% tax on mobile data in Uganda

With the uproar, there was some defiance as the tech-savvy population devised ways to avoid the tax by downloading Virtual Private Networks (VPNs) and using WiFi. This cost the government billions of money in losses as the tax collecting body Uganda Revenue Authority (URA) reported under performance of the tax.

URA suggested in 2019 that the tax be scrapped since it performed below the expected target as it generated only UGX 49.5billion out of an expected UGX 234billion. The former URA Commissioner General Doris Akol said, “Proposing to amend Schedule Two of the Excise Duty Act to look at possibly putting excise duty on data…this would counteract the effects of OTT and make it a bit more efficient to collect tax on data instead of the OTT which is highly evaded and is not performing well.”

Parliament has now approved the new tax on data as the chairperson of the Finance Committee Henry Musasizi said they will consider passing the tax since members of the committee did not protest it. According to the Observer, he says that 12 per cent is actually a fair tax and that it can easily be collected. He says that if any challenge arises, they can review the tax after 12 months. 

“12 per cent on data is not much. For example, some people use up to Shs 500,000 worth of data per month, now 12 per cent of that is only Shs 6,000 [actually 60,000],” Musasizi said.

Read also: Ugandan MPs asked to return iPads or retain them at a fair price

More reports from the Observer indicate that Regina Navugga, the Program Coordinator Financing for Development at the Southern and Eastern Africa Trade Information and Negotiations Institute (SEATINI) rejected the 12 per cent tax on data and the annual Shs 200,000 licence for motorists. She proposed that the tax on data be reduced from 12 to 5 per cent.

Navugga said that although there is an increase in the use of data services, the revenue from the services including airtime is dwindling and adding more tax on data could further reduce the revenue collected.

The introduction of the digital tax on social media caused a huge impact on online businesses in 2018 as many struggled to reach customers since they had established themselves through social media platforms. With a new tax on mobile data in Uganda, the impact is unprecedented since more people have come to rely on the internet due to the disruption caused by the novel coronavirus.

Many have turned to social media to express frustration that the tax would increase the already high data costs and restrict digital inclusion.

Read more: Social media finally restored in Uganda after 29 long days

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