Content creators in a fix over YouTube’s new tax policy

YouTube is the go-to destination for video consumption on the Internet.

The video streaming platform has more than 2.3 billion accounts and 31 million channels across the globe.

With the information age upon us, people are accessing content closely by relying on “YouTubers,” a term that refers to content creators that upload content on the video sharing and streaming platform.

Infact, YouTubers or content creators are rapidly taking over traditional media platforms.

Their sales potential is spilling over beyond YouTube to include endorsement deals from major companies such as banks, telecoms as well as government agencies.  

For Ugandan YouTube channels in particular, the 2020 statistics reviewed from YouTube indicate that; Eddy Kenzo’s channel is currently the highest paid at Shs144 million per month, followed by Masaka Kids Africana at Shs74 million, and Comedian Anne Kansiime at Shs27 million per month.

However, in a recent raft of measures, Youtube seeks to tax revenues from YouTubers earning from their content.

The Video streaming platform communicated to all content creators through an e-mail over a revision of its monetisation policy.

 The policy will allow the platform to place more adverts on any content of its choice on all channels, and not just on those channels that come under YouTube Partner Programme (YPP).

The new rules, applicable from June this year, have caused a stir among content creators.

YouTube Partner Programme

YouTube Partner Programme allows content creators to earn from their videos.

However, before joining the programme, YouTube requires a content creator to raise at least 1,000 subscribers and have more than 4,000 valid public watch hours in the last 12 months. This is also supplemented with a linked AdSense account.

Under the YouTube payment programme, YouTube pays content creators through video views, ad impressions, and estimated monetised playbacks. This means to get paid, the number of times your video is watched with adverts matters.

For instance, if your video is viewed 10 times, and eight of those views contained adverts, you would have 10 views and eight estimated monetised playbacks.

YouTube uses the Revenue Per Mile (RPM) as a metric tool that represents how much money you have earned per 1,000 video views.

RPM is based on several revenue sources including: Ads, Channel memberships, YouTube Premium revenue, Super Chat, and Super Stickers. 

New change

Under its new policy, YouTube explicitly states; “YouTube has the right to monetise all content on the platform and ads may appear on videos from channels not in the YouTube Partner Programme.”

Before this, adverts were placed by the platform only on videos by creators who were a part of the YouTube Partner Program (YPP) with a certain number of subscribers and views.

However, creators with small channels who are not a part of YPP will not earn revenues from the ads curated by YouTube on their videos.

YouTube also seeks to tax content creators who are part of its partner programme.

 “Content creators entitled to revenue payments, such payments will be treated as royalties from a U.S. tax perspective and Google will withhold taxes where required by law,” the statement reads in part.

YouTube also states that the exact rate of tax withholding will be determined by the tax information a content creator provides to Google.

Creators who don’t submit tax information will have a final tax deduction of 24 per cent worldwide.

But is this problematic?

Dius Walugembe, a content creator working with Spark TV in Kampala, says the new law will eat into content creators’ revenues.

 He signals that the worst is for content creators earning between $100 (Shs365,000) and $500 (Shs1.7 million). 

Since YouTube only pays content creators who have clocked $100 in earnings, this means any tax deduction on the amount could mean a drop.

“If I earn $100 (Shs365,000), it means with new tax proposals, I won’t earn anything because there will be a drop in my revenue,” he says.  

The new tax rule also means content creators with small channels will be required to place more content on their platform to beat the tax and revenue target.

However, Walugembe also mentions that it is a big advantage to place adverts on small content creators who are yet to start earning from YouTube.

Although smaller channels have got traffic, so far that traffic is not sufficient enough to hit minimum revenue generation.

This means they will be able to raise money quicker which will be paid once they hit the 1,000 subscribers mark and the 4,000 public watch time.

Mustapher Mugisa, a digital expert says, the traditional business model of Google has been to showcase the services and products of companies globally.

This is therefore a move by Google to optimise the eyeballs on each platform for anybody who has content. At the end of day, it is about streamlining revenue policies.

“If Google is paying royalties, it eases collecting revenue collection for tax purposes. But also globally, there has been a difficulty in collecting taxes from content creators,” he says.

He adds: “Under the new service by Google, the new tax policy means that creators will be subject to the tax laws of their respective countries.”

The question remains: Could this tax policy create rivalry and lead to independent streaming away from YouTube? Perhaps yes or not?

Mugisa believes YouTube has built a formidable system that is ‘too big to fail’. If content creators desert YouTube over the new laws to create alternative channels, they will still need YouTube to thrive.