The controversial social media tax, which has been a source of contention for many, has finally come to an end. The (Over The Top) OTT tax adopted in 2018 sparked popular outrage because it meant that individuals would be charged an additional fee to access social media platforms on top of the data bundles they already paid for.
Also read: Government proposes new tax on ATM withdrawals in Uganda
High internet bundle prices, combined with bad connectivity, are a prevalent complaint among many people, resulting in a miserable internet experience. With the imposition of OTT in 2018 that no one was looking forward to, it seemed to deepen the burden further. The government justified the tax by claiming that it was necessary to raise income while also limiting the spread of propaganda via social media.
OTT tax fails to hit target
The effects of the tax were unprecedented as it performed below its set target according to UCC in 2019. According to The Observer, there was a 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.”
This implied that many found ways to cope without it as Uganda’s tech-savvy population jumped onto the VPN train dodging the tax.
Read more: Government proposes scrapping of OTT tax, suggests new 12% tax on mobile internet
Parliament passed the new internet tax in April this year that would see OTT being scrapped. The 12% tax will be imposed on mobile data, unlike OTT that was only imposed on social media. This tax will exclude the use of the internet for the provision of educational and medical services.
What to expect from 12% tax on mobile data
It’s not yet certain how the tax will work. A telecom engineer believes the tax could work in two possible ways;
1. Since the market is so competitive, companies will most likely have to forfeit some of their profits and bear the tax. This means any changes to existing offers is to either keep the price and keep the volume or increase the price and increase the volume in a way that consumers will neglect the price increase. This makes the consumer spend more, thus increasing the profit margin while bearing the tax.
2. Let the consumer pay the tax by reducing the volume offers or increase the cost without increasing the volume. This option is very unsustainable he says.
As the government looks towards ways to tax online spaces, the most affected people are people who have come to rely on the internet as a source of income. Content creators and owners of online businesses are usually the most affected as all these government measures act as barriers to access the internet easily cutting them off from their customers and the ability to grow.
Lynn Kwikiriza, a content creator on YouTube says the new tax is bound to create a negative change in online spaces as the removal of OTT tax has brought along a new tax instead. She explains that data could become more expensive than it has already been.
As we start the new lockdown, more services have been shifted online requiring people to have easier access to the internet now more than ever. More taxes being imposed on online spaces would affect many greatly as people are now working and studying online more.
Read more: YouTube will tax content creators outside the U.S
Read more: New URA tax filing deadline 2021 has been announced
READ: Application for movement stickers for essential workers will be done online