Taxes on Internet have been the biggest challenge to achieving digital inclusion and low data costs, according to Airtel Uganda managing director.
While reviewing the business environment, particularly in the telecom sector in 2019, Mr VG Somasekhar, the Airtel managing director, told Daily Monitor in an email exchange early this week that whereas the telecom sector has tried to reduce data prices, achieving affordable data prices and digital inclusion remains difficult because of the current structure of the tax regime.
“With VAT [value added tax], Excise Duty and OTT [over the top tax], the tax on Internet access is over 50 per cent. Despite lowering data bundles, consumers are [still] burdened with these taxes, directly affecting digital inclusion,” he said, noting that despite all these challenges: “Uganda is digitally ready to leap”.
Government last year implemented the controversial over the top tax, which requires Ugandans to at least pay Shs200 every day in order to access some websites, many of which are social media sites.
The tax, which was an addition of the already existing ones, sought to widen the tax base in which government had targeted to collect at least Shs24.6b every quarter.
However, collections have been a mixed bug due to a noted reduction in Internet expenditure and the persistent use of Virtual Private Network (VPN) as subscribers try and maneuver around the tax.
There have been unconfirmed reports of government considering a review of the tax, given the mixed collection returns.
Mr Somasekhar also noted that it was important that government resolves the issue of hoarding the spectrum, saying Internet speeds can only be enhanced by providing the right spectrum to operators who have invested.
“Implementation of the new broadband policy of ‘use or lose’ the spectrum is key in improving quality of service,” he said.
However, Mr Vincent Bagiire, the ICT Ministry permanent secretary, told Daily Monitor in an email at the weekend that government was finalising guidelines to operationalise the National Broadband Policy, under which “any operator hoarding spectrum will lose it”.
Mr Godfrey Mutabazi, the Uganda Communications Commission executive director, said as the regulator, they have ensured quality Internet access across the country with Ugandans now able to access 4G and 3G Internet from border-to-border.
This, he said, will be key in digitisation government services which seeks to improve service delivery.
Government recently embarked on a programme that seeks to digitize related services to ease access and accountability.
So far, a number of key government services, among them, online application of travel documents, have been digitised in a bid to curb corruption and unnecessary delays.
Tax on mobile money
Mr Somasekhar also noted that whereas the mobile money industry had experienced growth in terms of subscriber numbers, the introduction of a cash withdrawal tax of 0.5 per cent on mobile money had created an unleveled playing ground in an era when other digital platforms such as digital banking and agency banking are competing with mobile money.
“Technology has removed boundaries between banking and telecom … while the tax policy is yet to recognise [this],” he said in reference to the lack of a harmonised tax regime on the different digital money transfer platforms.