What you need to know:
- The artists argue that the taxman should first ascertain how the industry works before determining which taxes they can pay.
The Culture and Creative Industries in Uganda are increasingly attracting the attention of various stakeholders, the latest being Uganda Revenue Authority (URA), which seeks to make artistes across the multidisciplinary spectrum to familiarize themselves with proper business practices and fulfill their obligation of paying taxes from their earnings.
The Income Tax Act is the law on taxable income by any Ugandan, including artistes. It provides for business, employment and property income.
Mr Anthony Kakooza, a lawyer at Byenkya, Kihika & Company Advocates, says it means an artiste has to pay income tax after gaining an income from his or her music as a business, for example performances; income made on music by way of a salary as, say, an artiste employed by a music studio company and paid a monthly salary for his or her music; or income made from music as an asset (or property) through its utilisation in radio or TV adverts, licensing, caller back tones, and movie soundtracks.
Artistes or entertainers include stage performers, authors, music producers, and the like. They are expected to pay income tax amounting to six percent from their total earnings.
By 2017, Uganda’s Culture and Creative Industry contributed Shs47.1 trillion to the National Gross Domestic Product (GDP), according to a 2014 survey by the Ministry of Gender, Labour and Social Development.
Artists in Uganda
A joint mapping 2015 study conducted by Uganda National Commission for Unesco and the Ministry of Gender, Labour and Social Development indicates that a total of 386,000 people were employed in the art and creative industry. This was an increase of more than 146,000 people over a period of five years from a total of 250,000 people.
A Uganda Bureau of Statistics (Ubos) 2013 survey indicates that there are more than 12,460 small and medium enterprises (SMEs) in the creative industries in Uganda, which number is likely to be much higher today.
The industry is fertile for taxation but as veteran musician Diplock Ssegawa argues, URA needs to be part of the creative process to appreciate and follow-up expenditures of artistes from the training, practices, rehearsals up to actual presentation.
“The major concern is that many a time, many artistes put up appearances as if all is rosy and URA looks at them yet they actually earn from other ventures, not their art per se,” Ssegawa explains.
He adds, “Let us be realistic, during rehearsals, a lady brings in chapatis and tea for musicians or 13 plates of food during lunch breaks, and you pull out the vouchers to sign or you tell each artiste to sign.”
Artiste Ronex Ahimbisibwe says the creative industry or artistes want to be understood first.
“Creating is a process, not an event. Most of the individuals they tax are middlemen who sell what others have created. You cannot treat creators and middlemen the same. What the public sees is a result of what they are not seeing. In summary, artistes are seeking a partnership, not a co-wives kind of relationship,” he argues.
He adds that what URA is seeing now and wants to tax are decades of sacrifices by individuals.
URA insists that their mandate is to collect taxes but the artiste notes that his mandate is to create.
He further says, “The creative industry thrives on patronage. Their [URA’s] approach will suffocate the industry yet expecting it to breathe.”
Artist Jacqueline Katesi Kalange says her major concern is that visual arts have challenges of being unfairly taxed, for example being required to meet the costs of copyrighting each of the countless creations they execute during their lifetime, which creates an environment of not being understood and under representation by the law and the costs associated, for example the Copyrights and Neighbouring Rights Act 2006.
“URA should come to the grassroots of the different sectors within the creative industry to get firsthand information so as to offer effective services that will in return create a sense of belonging and inclusion for even the least understood sectors like the visual arts,” she suggests.
Event organiser Nicholas Nyombi says artists must realise they need to have basic administration and business knowledge or hire professional assistants to help them with consistent book keeping and filing returns.
“The entertainment sector is so informal and government/URA needs to use more informal strategies to reach many more potential clients. For the gospel fraternity, they must find a way of engaging the spiritual leaders. Government needs to be patient in managing their revenue targets with the sector, especially since it hasn’t invested convincingly in the required infrastructure, even the basic,” Nyombi, the organiser of the annual Victoria Gospel Academy (VIGA) awards, states.
Kakooza advises that artists need to appreciate that any income they make from their music or creative works has to be taxed and URA needs to also appreciate that building up awareness in tax compliance among artists is important. However, the lawyer observes that URA does not know how to value income derived from the artist industry, nor does it understand how wide the artist industry is.
“This is an industry that involves performers (including comedians), producers, publishers, songwriters and so on. All these earn from the industry but their input and output are not standard or fixed but more of contractual.”
Musician Alexander Bagonza, aka A Pass, says: “I think they should know who they are dealing with and how the industry really works.”
Kakooza recommends that URA should start developing an understanding of the creative industry as a whole and how to establish value in creativity by, for example, understanding how to value copyright by training its staff in this regard. Once such a value system is ascertainable, then understanding how to tax such creativity at different rates would follow.
Kakooza also adds, “This should be through creating tax rates that are categorised according to certain ranges of income based on the ascertainable value in creativity. For instance, if it can be ascertained as to how much a musician’s take-home income is, after paying off the events manager; the owner of the venue where a performance is held, security detail, and so on, then this is the business income that is taxable at a given rate. It would be easier for URA to ascertain and tax income generated from caller tunes and performances and weddings and other events, because such an income is direct with hardly any cutbacks to think of.”
On the part of persons in the creative industry, the lawyer implores them to appreciate that they have an obligation to pay taxes on any income earned, since it is a financial gain on their part.
So, the Income Tax Act is already in place. All that is required is for URA and artists to understand how it can be applied in their business through sensitisation.
Charles Batambuze, the vice chairperson of National Cultural Forum, observes that over time, government has invested in the sector by way of developing a culture policy, creating an enabling environment for the creatives, facilitating formation of the National Culture Forum, engagement of various stakeholders, contributing towards regional and national festivals and Uganda National Cultural Centre activities, including providing a wage subvention; renovation of National Theatre building, among others.
He notes that creatives contribute to the country’s revenue targets through both non-tax revenue (NTR) and direct taxes. Estimates for NTRs show that the government could generate about Shs2.6b from licence fees and Shs1.8b from registration of business fees.
Creative industry tax potential
Meanwhile, URA has demonstrated that the creative industry has high tax potential. It is reported that in the last quarter of 2022, URA collected Shs26b from public entertainment events. An extra Shs39b is the estimate collected in taxes on Caller Ring Back Tunes (CRBTs). There are more than 32 revenue streams within the industry that could be harnessed for tax and royalty generation.
Batambuze says this calls for urgent attention of the government to nurture, support, prioritise and adequately budget for the creative industries sector.
The potential market for cultural goods and services in Uganda has been estimated at about Shs7.05 trillion, according to the Ministry of Gender, Labour and Social Development 2023 study.
“This market potential is being exploited through several commercialisation activities that include direct sales, concerts, festivals, Internet, broadcasting and other ways,” Batambuze explains, adding that between 2004 and 2008, Uganda exports in cultural goods and services were valued at $239m (Shs881b).
He adds that the key issues affecting access to markets and commercialisation include rampant copyright infringement, which is the unauthorised exploitation of music, films, literature and other copyright-protected works, limited culture infrastructure for performances, exhibitions of works to enable commercialisation across the country, lack of support for commercialisation activities such as festivals, awards both locally and internationally; limited skills among practitioners in areas like marketing, digital, and in some cases production, which impacts on incomes earned and more.
The meeting between artists and URA was made possible by Kuonyesha, a local Arts support initiative by CivSource Africa.