Government proposes scrapping of OTT tax, suggests new 12% tax on mobile internet

The Minister of Finance Matia Kasaija tabled a number of bills before parliament yesterday 1st April 2021, including where government proposes scrapping of OTT tax (Over The Top)/social media tax. He presented the proposal under the Excise Duty (Amendment) Bill 2021 and suggested excise duty on mobile data at a rate of 12 per cent.

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The OTT tax also known as the controversial tax has been a topic of nationwide debate since it was imposed in 2018 as many expressed outrage. Many Ugandans did not receive the news well since this new tax would increase the already high expense of accessing the internet. The tax was introduced to reduce the spread of propaganda and misinformation through popular social media platforms like WhatsApp and Facebook.

Government proposes scrapping of OTT tax, suggests a new tax instead

The news that government proposes scrapping of OTT tax could be music to some people’s ears however the Minister of Finance is suggesting the re-introduction of excise duty on internet data at 12 per cent instead. Unlike OTT tax that was imposed on social media platforms, this tax will affect general internet usage. According to the audit firm, PricewaterhouseCoopers, the Bill proposes exclusion for data used for the provision of medical and education services.

According to The Observer, the new proposal by the government to repeal the Shs 200 tax follows last year’s revelation to parliament’s finance committee about plans to drop OTT and instead impose a direct tax on mobile data. 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.”

The government proposes scrapping of OTT tax and many would agree to this since the tax has increased the already high cost of internet in Uganda. Internet rates in Uganda are quite high which has limited digital inclusion for the majority of the population since they look at it as a luxury. The controversial social media tax has not done much to help with this situation in any way.

Since its introduction in July 2018, it has resulted in losses for government because of the high cost of its implementation compared to the revenue it generates. URA (Uganda Revenue Authority) 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.

Read also: Why absurd OTT tax should be scrapped

One of the factors attributed to the poor performance of the social media tax was the fact that the tech-savvy population had discovered ways of evading the tax through the use of Virtual Private Networks (VPNs) which made tax collection difficult.

In 2020, the World Bank suggested that the OTT tax be scrapped by government since it was limiting access to the internet which many needed to get vital information about the ongoing pandemic. The tax was never scrapped and neither was the suggestion taken into consideration.

As government proposes scrapping of OTT tax, a number of other bills were tabled before parliament by the Minister of Finance. The Speaker of Parliament Rebecca Kadaga asked the finance committee to report back after a thorough revision of all the bills including the Excise Duty Amendment Bill 2021.

People took to social media to express their disappointment after hearing that OTT will be scrapped and replaced with a new tax instead.

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