Ugandan police fired live bullets and teargas Wednesday to break up a crowd of demonstrators who had gathered to protest a controversial tax on the use of social media.
Since the beginning of the month access to media such as WhatsApp, Facebook and Twitter, as well as dating sites Tinder and Grindr, have been blocked unless users pay a 200-shilling ($0.05, 0.04 euro) daily tax.
In a statement, President Museveni justified the move saying many citizens did not pay their taxes as they were meant to, and should not "donate money to foreign companies through chatting or even lying" on social media.
Last week, President Yoweri Museveni clarified that the 1 per cent tax on mobile money was a miscommunication. He said the correct rate of tax is 0.5 per cent. Taxation expert Francis Kamulegeya responds to the questions raised by President Museveni about the mobile money tax.
When you post or send communication on social media platforms like Facebook or whatever, is it free or do you pay?
No, it is not free. Before you can post or send communication on social media platforms like Facebook or Whatsup, you need an internet connection. This internet connection is provided by the telecom companies and other internet services providers (ISPs). The telecom companies and ISPs have different packages they offer to users in form of mobile internet data bundles for different prices. For example, MTN has internet data bundles that cost as little as Shs250 for 15MBs per day, to high-end unlimited internet premium monthly data bundles of Shs330,000 per month. For every Shs100 that we pay to telecom companies or ISPs to access the internet, Shs30 goes to the government as tax. This is the 12 percent excise duty and 18 per cent VAT.
It is important to note that the telecom companies and ISPs do not own the social media platforms that government is targeting. Likewise they do not provide the content nor do they control what is published on these social media platforms. They are simply a conduit providing access to these platforms. It may be true that after paying the telecom company or the ISP and getting access to the internet, one is then able to enjoy access to Over-The-Top services free of charge. But to access that free service, one has to pay first.
Do you send mobile money for free or do you pay?
You do not send mobile money for free. You pay for the service. For example, when you send Shs1 million you are charged Shs2,000 as the sender, if you are a registered user. To withdraw the Shs1 million from your mobile money account from a mobile money agent, you are charged Shs19,800. So the total charges for sending and receiving in this example would be Shs21,800.
If you pay, whom do you pay?
Out of the Shs21,800 you are charged by the telecom company in the example above, 15 per cent is tax that you pay to the government. This means out of the Shs21,800 deducted from your Shs1 million, the telecom company keeps Shs18,956 as a charge for providing you with their mobile money platform and the government takes Shs2,844 from you as tax in form of excise duty.
Do you pay in dollars or local shillings?
You pay in local shillings. The mobile money companies are required by law to publish as well as display their charges in Uganda shillings at their mobile money agents. If you are one of the 22 million Ugandans who have mobile money accounts you will have noticed these charges displayed at your local mobile money agent.
If you pay in local shillings, do the ones you pay, most of whom are foreign companies, take money out of Uganda in local shillings or in dollars?
There are no foreign companies licensed to provide mobile money services in Uganda. All the telecom companies licensed to provide mobile money services are Ugandan companies. These companies are incorporated and registered in Uganda. They are regulated by both the Uganda Communications Commissions (UCC) and the Bank of Uganda. It is true majority of these companies are owned by non-Ugandan citizens. We call these people foreign investors. We invited these foreign investors to come and invest in our country when we liberalised the telecommunications sector in Uganda over 20 years ago.
When the foreign investors came to invest, they brought their money into Uganda in form of dollars. They brought dollars either directly as cash for investing into Uganda or as plant, machinery, equipment in form of telecom towers, mobile switches and so on.
One of reasons Uganda has been very successful in attracting Foreign Direct Investment is because we allow foreign investors to take their money out of Uganda. This is what we are telling investors all the time. However, before they take the money back to their foreign countries, we make sure we retain some of it. In fact for every $100 a foreign investor makes in Uganda as profit, the government takes $45. This is in the form of corporation tax of 30 per cent on the profits made by the investor and 15 per cent on the dividends the investor takes out of Uganda.
Kampala- Prices of airtime scratch cards have increased by 10 per cent, drawing angry reactions from customers who had no prior information.
This now means a scratch card of Shs1,000 is sold at Shs1,100, the one of Shs2,000 costs Shs2,200 and the one worth Shs10,000 goes for Shs11,000.
Vendors said telecom companies in communication to them attributed the increase to new taxes that took effect on July 1.
Mr Muzamil Kanunabi, a boda boda rider at Clock Tower Post Office stage in Kampala, said he was surprised to receive a balance of Shs400 when he paid Shs1,000 for phone credit worth Shs500.
“This is cheating,” he said, “I was annoyed, but the lady (vendor) told me the telecom people had communicated to them that the prices have increased.”
Journalist Kiyingi Musisi, who was charged Shs2,200 for Shs2,000 airtime scratch card, wondered why telecom firms had not informed the public and printed new cards with prices corresponding to the phone credit.
Telecom operators, however, deny increasing airtime scratch card prices.
Ms Sumin Namaganda, the Airtel spokesperson, said they never increased the prices of scratch cards, adding that airtime vendors are acting illegally.
Mr Val Oketcho, the MTN Uganda spokesperson, was unavailable to comment.
An employee of the company, who only identified himself as Hillary, in a response to our inquiries on social media, stated: “It is not MTN’s position to increase cards prices and we apologise for the inconvenience caused by the agents who have decided to overcharge customers.”
The telecoms asked subscribers to buy airtime and bundles using Mobile Money.
KAMPALA. Uganda Revenue Authority (URA) has clarified that there is no new tax levied on airtime scratch cards but instead asked the telecom operators to account for the full value of the price on scratch cards.
The telecoms have been giving discounts to distributors of the scratch cards and it’s on these discounted fees that they have been declaring their VAT instead of the full face value.
Mr Ian Rumanyika, the URA manager for public and corporate affairs, said: “What happened, for example, airtime of Shs10,000 sold at Shs9,300 and the telecom companies would declare and charge VAT at Shs9,300 instead of declaring full face value of the airtime.”
There has been a wide-spread outcry by customers that the price of airtime scratch cards had been increased.
Customers, especially from upcountry, have been asked by the retailers to pay between Shs200 and Shs500 more than the fixed price when purchasing scratch cards.
But Mr Rumanyika says the distributors do not offer services to the telecom subscribers but to the telecom firms by distributing their products.
“It was agreed that telecoms must account for the full value of airtime and then the distributors charge the telecoms for their distribution services,” he explained.
Distributors speak out
In an interview with this newspaper yesterday, Mr Emmanuel Matovu, a distributor at Kabalaga in Kampala, said the telecoms have been giving them a 4 per cent margin off the scratch cards sold.
However, this has since been reduced to 3 per cent and 2.5 per cent on the scratch cards sold.
“This means the agents’ commission earned from the sale of airtime reduces that is why you see some have resorted to hiking the price of the scratch cards especially upcountry,” he said.
In an interaction, Mr Isaac Kyanzi a supervisor for Heritage Telecom Ltd, the distributors of airtime scratch cards to Matugga area in Wakiso District, said they only reduced the commission by 1 per cent from 4 per cent.
There have been many complaints and confusion about the mobile money tax. It is a sad spectacle seeing government officials appearing almost brainless as they first defended then changed and apologised for the tax. When the history of Uganda in the year 2018 is told, people will talk about the mistake tax also known as the mobile money tax.
The President as well as the Minister of Finance have said the percentage levied is a mistake. The rate should have been 0.5 per cent and not 1 per cent. That confession exposes a long line of people who should have caught the mistake before it was signed into law.
The mistaken people are all over government from the President, through ministry of Finance, Parliament and Uganda Communication Commission. Many people warned about the folly of the mobile money tax before parliament passed it and even more warnings were made before the president signed it into law.
The ‘mistake’ is, therefore, the inability of people in government to listen to feedback from the public or to use common sense when told that something is ‘order from above’.
There is yet another mistake with the Mobile Money Tax. Between July 1st and 4th the telecommunication companies were charging the tax four times. They charged when a person deposited money into their wallet, then charged when person sent the money to another wallet, charged when the recipient got the money and finally charged when the recipient withdrew the money.
Uganda Revenue Authority (URA) has now told telecommunication companies not to tax people when they deposit into their wallet or when they use mobile to pay taxes.
There is a third mistake that even URA is quiet about. The calculation of the tax is wrong and in effect, people are paying about 1.02 per cent instead of 1 percent. The tax should have been discounted as is the case with VAT.
The fourth mistake is that the whole idea of taxing people for keeping money or withdrawing it from their mobile money wallet has no merit. The tax cannot be explained. It should simply be rescinded.
James Abola is a business and finance consultant. Email: email@example.com
Since July 1, accessing social media in Uganda will set you back by a ‘mere’ Shs200 as an entrance fee into the party.
Now many of those who enjoy WhatsApp, Facebook, Twitter, Instagram, Snapchat and many others are not ordinary hard up citizens scratching for a living. But they are up in arms.
They say by levying the tax, the government is trying to muzzle them. That it is their right and freedom to communicate via social media.
Others like Timothy Kalyegira are very gleeful and wish that the tax would go up to about Shs500 because most of the people accessing social media (probably the ones he interacts with) are not exactly a serious lot.
That they hardly reason or think correctly as they rush to make arguments. That they are prone to making typos, don’t appreciate good photography and generally are wasting this opportunity of tapping into the vast potential that is social media to bring about political, social and economic change.
Government on the other hand, says this ‘luxury’ called social media that prompts many to gossip, spread false news and incite the public, must be taxed to contribute revenue for national development.
We shall hear these arguments and many more for a long time to come so here we won’t go in that direction.
Suffice to say that there is almost nothing this Shs200 can buy in the Uganda of today, not even a sweet. So, you can’t rule out that most people are digging in as a form of protest. They just don’t want to finance the government mostly for political reasons.
The enduring argument being that ‘their money’ will just go into the pockets of the fat cats and their cronies. All that will become clear in the days, weeks and months to come.
For me, the most humbling aspect of the brouhaha this matter of social media taxes has caused is the one about the opportunism of African countries, how they have been spoilt into waiting for outsiders to think for them and what impact this has had on their productivity, imagination and ability to invent or create things.
To speak very plainly, both the government, which intends to fork in billions of shillings by taxing social media and those beating their chests claiming access to social media as their right have contributed nothing to its making. They are just taking a piggy ride.
Yet when you think of it, social media is not exactly about building using motar and stone. You don’t have to possess big muscles to be part of the Internet and communication revolution. The whole thing is virtual and provides equal opportunities for those with access to the Internet.
An American executive on Wall Street and the barefooted shamba boy in Mutukula have equal opportunities on the Internet. The difference is what they do with this access to the World Wide Web. Their cerebral limits, interests and attitude determine which direction they take on the Internet and how it benefits them.
You see, one may choose to share jokes and the ‘latest nudes’ the whole day on social media and this one is the wont for many.
Then there are those who get the most out of this business by creating apps that they sell and get billions of dollars. They are the brainy warriors who have put their creative spirit to test.
Many of the inventors or investors of Facebook and Twitter plus a whole load of others are now billionaires. We are talking about the likes of Mark Zuckerberg, Jack Dorsey, Noah Glass, Biz Stone, Evan Williams, Bill Gates and all the people in Silicon Valley and other Tech Hubs.
These ones burn the midnight candle and to make happen, what many of us who come in to simply use and (abuse if you asked some) and are now calling ‘our right.’
Just imagine if we woke up one day and the maverick President of the USA, Donald John Trump, restricted the use of social media in countries like Uganda for preposterous reasons that it is encouraging ‘terrorism!’ What will become of this ‘right’ of ours?
Or better still, what will happen to the government’s targeted estimated revenue in billions of shilling this financial year? The answer tells you that Africans have been baby-sat for so long that it will be difficult for them to ever walk without being held.
Aid, grants, donations are part of that narrative. The African mind is dying.
Just imagine what the universe would be like if it waited for Africans to come up with communication solutions. Probably we would still be at the stage of sending the village messenger to the next village to courier news and pray that wild animals did not eat him up along the way.
Mr Sengoba is a commentator on political and social
If it is dollars, who earned those dollars?
The investors take the money out of Uganda in form of dollars. We all agree that taking Uganda shillings to South Africa or India would not make sense. In any case, they did not bring shillings when they came to invest. Who earned the dollars? The investors. They provided services to us Ugandans. We paid them for the services. They made a profit. Government took 30 per cent of these profits in form of corporation tax. Government took another 18 per cent and an additional 12 per cent of whatever the investors charged us for their services, in form of VAT and excise duty respectively.
I pay my daughter’s university tuition fees in Pounds. I have to earn money first here in Uganda and in shillings, and then use my hard earned shillings to buy Pounds from banks and forex bureaus and then send the money to United Kingdom. It is my money. I earn it by working for my employer, who pays me a salary in Uganda shillings.
Debating 0.5 per cent tax
First of all the rate of tax according to the excise duty Amendment Act 2018, that was assented to by HE the President and signed into law on June 21 is 1 per cent and not 0.5 per cent. That is the current law. That notwithstanding, the current debate is not on the rate of tax. It is on the logic, rationale and principal of the tax itself.
The problem with this tax is that it is taxing the movement of money. Taxing the movement of money discourages trade and commerce. It discourages the formalisation of the economy. It interferes with financial intermediation.
It undermines the progress and successes made in the country in respect of financial inclusion. It hurts the poorest most, and this is already evident on the basis of the impact the tax has had in just five days. It will result in massive loss of employment, both direct and indirect employment in the mobile money sector. It will discourage people from using mobile money services. It will increase the cost of doing business in Uganda.
There are still conflicting messages about who it applies to, when it applies and who should be paying the tax. The new Excise Duty Amendment Act 2018 states: “1% excise duty tax will apply on mobile money transactions of receiving, payments and withdrawals”
So when exactly does this mobile money tax apply?
Does it apply to receiving payments on mobile money accounts? If yes, receiving from who? If I transfer money from my bank account to my mobile money account, I’m receiving money from myself? I’m I required to pay the 1 per cent or the proposed new 0.5 per cent reduced mobile money tax?
If I receive my salary from my employer on my mobile money account, do I pay the 0.5 per cent mobile money tax? If yes, why should I pay this tax yet my salary has already been subject to Pay as You Earn and taxed at 30 per cent? If I opted to receive my salary direct into my bank account, there will be no mobile money tax of 0.5 per cent. So is this a tax on income or a levy / penalty for using mobile money?
Applying 0.5% tax
1. The tax also applies on payments made using mobile money
What kind of payments? The law, in its current form, does not exempt any payments from the tax. It does not matter whether you are paying tax to the URA, remitting employees’ contributions to NSSF, paying school fees for your children, making contributions to a relatives funeral costs (mabugo), or paying your tithe in Church. The law is so broad, indiscriminate, punitive and illogical. It is so illogical that the URA has now also realized it. That is why the Commissioner General had to issue a clarification early this week that the 1% tax will not apply to the payment of any taxes using mobile money platforms. This makes sense, as it avoids payment of tax on tax. However, this position is not supported by the law, in my view, on the basis of the current wording of the law.
If payment of tax is exempted, payment of NSSF contributions should also be exempted. Paying SACCO contributions should also be exempted, especially considering that SACCOs are exempt from tax. Contributing mabugo to bury a loved one should also be exempted from this tax. Paying school fees should also be exempted. There are so many exemptions that would need to be considered, so the only option is to abolish, scrap and abandon this tax. Government should consider other options to raise the badly needed tax revenue to finance the budget.
2. We are now told that the tax will only apply on withdrawals from mobile money accounts
Withdrawals by who? If I pay school fees by mobile money, is the school expected to pay the 0.5 per cent tax when withdrawing the school fees from its mobile money account to buy beans and maize flour to feed the school pupils? If the answer is yes, what is being taxed here? Is it the withdrawal of money, or the spending of the money? If the tax is only on withdrawals, is the government’s intention to discourage people from withdrawing money from their mobile money accounts? Is this a sneaky way of encouraging digital money and discouraging use of cash? These are all pertinent questions and Ugandans deserve answers.
Mobile money tax
Mr Francis Kamulegeya says the issue is not the rate but the principle. This is an issue of mis-taxation. You are taxing the wrong thing, taxing the wrong people and taxing them at the wrong time. He urges the President and Members of Parliament to abolish this tax immediately and consider other options.
Francis Kamulegeya is a UK trained Chartered Tax Adviser and Certified Public Accountant.
Wednesday's rally was led by singer and parliamentarian Bobi Wine, real name Robert Kyagulanyi, whose election last year was fuelled by social media.
Scores of protesters marched towards parliament, with the rally turning chaotic as a large group of market vendors and motorcycle taxi drivers faced off against police in anti-riot gear, with some lobbing stones at the officers.
"Teargas was fired and some live ammunition was fired into the air to disperse the crowd," police spokesman Luke Owoyesigire, adding two protesters had been arrested.
"During the unlawful procession officers had to act. Some of our officers were assaulted."
Police attempted to arrest Wine, but his supporters successfully defended him and he arrived at parliament where he hopes to address MPs later Wednesday.
"We set out to show our displeasure at the social media and mobile money taxes. We had informed the police of our intention to march and so we are dismayed at the use of brute force and live ammunition to break up a peaceful protest," said one of the organisers, journalist Raymond Mujuni.
"It's not right. Our rights as citizens are being trampled upon."