The Uganda Revenue Authority (URA) has revealed that Over The Top (OTT) tax on social media has nearly failed because of the high evasion rate. The URA chief, Ms Doris Akol, has proposed to Parliament to amend the Excise Duty Act to have the OTT shifted to Internet data in order to increase the collectability.
This is informed by the fact that in 2018/2019 financial year, out of the Shs284b expected from OTT, a paltry Shs49.5b was collected. However, although government is right to find alternative revenue sources to widen the tax base and reduce dependency on foreign funding, it must also be cognisant that such measures should not escalate the cost of doing business in the country.
Data is already highly taxed at 18 per cent VAT. Shifting the OTT from social media to data will worsen the already high cost of Internet access in the country.
Internet access is critical in all sectors of the economy. One needs data to conduct business, watch TV, do research, pay taxes online, send email or academic learning online among others. Our internet costs are already the highest in the region and Uganda is the 18th country in Sub-Saharan Africa with the most expensive Internet access.
Ugandan Internet users are already at a huge competitive disadvantage compared to their regional counterparts, in modern businesses nowadays that use more online communication than physical human movement.
The evasion of OTT may not necessarily be only because people are using Internet protocol bypass applications such as VPN. It could be that the public hate the tax itself.
The background preceding the introduction of OTT appeared political and this could have undermined its good intention to bolster the national revenue purse. The tax was introduced in 2018 after the President complained that critics were using social media such as WhatsApp and Facebook to abuse him.
The President then suggested government should consider taxing social media users. And the tax was introduced in the budget.Kyaddondo East MP Robert Kyagulanyi opposed the OTT saying it was a bad tax.
Instead of explaining its justification, government simply arrested him and slapped criminal charges against him. It distorted public perception. The tax might have been perceived as a tool for witch-hunt on political dissent, triggering public resentment.
Government should consider scrapping OTT rather than transfer it. Let government find other ways of raising money away from OTT. It can reduce the wasteful expenditure and cost centres such as the bloated public administration. This will give government more money essential national programmes than insisting on the failed and unpopular OTT.