Telecoms assessing impact of new tax on data prices

It will no longer be possible for internet users to circumvent tax payment. PHOTO/EDGAR R. BATTE 


What you need to know:

  • The new tax is expected to impact data prices, which have already been high compared to other East African member states. 

Telecoms have said they will, for now, absorb the 12 per cent tax on data until when they have reached a proper assessment of the impact of the new tax on data prices.  

Government early this year made a decision to scrap the Shs200 Over The Top (OTT) tax and replace it with 12 per cent Excise Duty that would be charged directly on data. 

Government had reasoned that OTT had failed to perform to expected levels with a number of internet users finding channels through which they could overlap the tax. 

Yesterday, Mr Amit Kapur, the Airtel chief commercial officer, said the telecom will maintain its pre-paid data prices despite the 12 per cent level, which took effect yesterday.   

 “We shall institutionalise the 12 per Excise Duty as mandated by government,” he said, adding: “However, Airtel will absorb the Duty for all pre-paid packs, thus maintaining our pre-paid data prices untill further notice.”  

Ms Rhona Arinaitwe, the MTN senior manager communications, said they were still assessing the impact of the tax, and will have to wait for an informed decision.

“As of today OTT has been removed, which means we have also removed our OTT bundles and therefore customers can access social media platforms without paying OTT, but bundles are still being bought at a standard price,” she said without giving more details. 

The new tax is expected to impact data prices, which have already been high compared to other East African member states. 
Mobile internet access, which is the main target in the new tax, has become increasingly popular due to growth in the number of internet-enabled mobile phones. 

According to Uganda Communications Commission, as of December 2020, there were about seven million smartphones, majority of which are internet-enabled.  

Ms Juliet Najjinda, a tax manager at PwC, yesterday said data tax will have an overall impact on individuals and businesses depending on how much data one consumes within or over a month. 

“For, instance, if an individual or company has been using data of Shs10,000 per month. Before was one would load OTT to access social networking sites and this meant a payment of Shs6,000 of OTT per month making a sum of Shs16,000,” she said, noting that in the new scenario corporate data users of above Shs100,000 will have to pay at least Shs12,000 to cater for the new tax.  

“You’re faced with a higher cost as a corporate user visa-vis what you were paying before,” she said adding that unlike OTT, the 12 per cent levy is mandatory. 

“Every time you load data, you will have to pay 12 per cent tax, yet with the OTT regime, it was voluntary to decide when to or not to pay,” she said.  

No way around 

According to Ms Najjinda, internet users won’t have “a way around it” like previously when most would circumvent OTT through VPNs. 

“One of the things government has been complaining about is that; more people have been circumventing OTT by using VPNs but with 12 per cent, the moment you click a purchase button, the telecom will have already deducted the 12 per cent, so we no longer have a way around it,” she says. 
 


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