OTT raises Shs20b in first quarter, URA fails on targets

Social media users are required to pay a daily tax of Shs200 to access some sites. FILE PHOTO

What you need to know:

  • According to the Africa Internet Users, Facebook and 2016 Population Statistics, there are 2.2 million Facebook users in Uganda. Of those, 1.5 million are active users (at least check in once a day). Majority of Facebook users, log in using a mobile device.

Kampala. Government collected Shs20.5b from social media in the last quarter ended September, according to data obtained from Uganda Revenue Authority.

The tax, which was implemented in July, was however, less than the Shs24.9b target that URA had hoped to collect in the period.
URA has a monthly target of Shs8.3b. The tax was introduced in the Excise Duty amendments of financial year 2018/19 requiring all social media users to pay Shs200 per day, before accessing certain platforms such as Facebook, Whatsapp and Twitter, among others.

Government intends to collect about Shs100b before the end of the 2018/19 financial year.
However, this continues to be a difficult prospect as some social media users have cut back on how much they spend on data while others are using Virtual Private Networks (VPN) to maneuver around the tax.
Mr Ian Rumanyika, the URA public and corporate affairs manager, blamed the use of VPNs as one of the reasons for the failure to hit targets.

“One of the reasons (OTT) has not been performing well is resistance. We experienced a lot of resistance in the first quarter thus failing on our targets,” he said.
The performance, however, he said, registered improved returns in September, which URA expects to continue in this quarter.
“It is catching up, because they [subscribers] cannot use VPNs forever,” he said.

Asked how far they have reached in regard to blocking VPN usage, Mr Abdul Waiswa, the Uganda Communication Commission legal counsel, said there have been attempts to block VPN but others keep being created.

“We cannot tell how many Ugandans are using VPNs because we do not know where or who is using it. We continuously block them but more keep coming up,” he said.
Ugandans have been using VPNs to access blocked sites. The apps were first used when government switched off social media sites during the 2016 general elections.

Mr Rumanyika also told Daily Monitor the OTT policy was reviewed to allow users pay the tax on a 24 hour basis.
Last week, telecoms said they had reviewed the payment system to validate the tax for a 24 hour window contrary to the old system, that would expire every midnight.

URA according to details seen by Daily Monitor also set the target for the next quarter ending December at Shs74.9b.
Government, especially President Museveni has insisted that the tax will not be reviewed or abolished despite continued resistance within and beyond Uganda.

Recently, President Museveni said the tax had been instituted on a luxury (social media) thus users would have to pay.
Facebook, which holds a consortium of some of the largest social media platforms such Instangram and WhatsApp, has previously indicated its displeasure with the tax, threatening to withdraw planned investments.

Not working well
The social media giant recently said the tax does not work well with some of the planned investments, among them extending free internet access to users.
Telecoms have equally been affected, especially in regard to revenues. Data had over the last five years become one of the main sources of revenue for telecoms, overtaking voice and SMS messaging.

Mr Olivier Prentout, the MTN chief marketing officer, indicated last week that OTT had negatively impacted data sales and usage.
“It has had an impact on MTN with a drop of above 10 per cent on users and usage. OTT also had an impact on revenue with a drop of 5 per cent in the last quarter,” he said.

The most affected, Mr Prentout, said have been daily users with bundles of below 50MB, which costs Shs1,000. This has seen an increase in SMS revenues in the last quarter, indicating that users are switching from social media to SMS usage.
For Airtel and Africell, OTT has caused a 20 percentage drop in users.

Ms Sumin Namaganda, the Airtel public relations manager, said the tax which translates to about Shs6,000 per month has significantly increased the cost of internet access in Uganda and a drop in volumes and usage.
“Since the introduction of OTT, we have seen a drop in data usage of 20 per cent,” she said, indicating they are hoping the numbers will recover in the next quarter ending in December.

Mr Edgar Karamagi, the Africell public relations manager, said the tax has most affected low income earners because the tax caused the elimination of low cost bundles.

“Bundles that were as low as Shs100 have been removed because they are less than the tax. We are of the view that a percentage based taxing policy will be less discriminating and allow people access services,” he advised.

Social media access

According to the Africa Internet Users, Facebook and 2016 Population Statistics, there are 2.2 million Facebook users in Uganda. Of those, 1.5 million are active users (at least check in once a day). Majority of Facebook users, log in using a mobile device.