What you need to know:
- The opposition reasoned that the provision, if passed, would have a trickle-down effect on Ugandans who happen to be consumers and or users of the services offered by the said digital companies.
Government has reintroduced and vehemently defended its plan to levy 5 percent tax on foreign owned companies offering digital services in Uganda.
The proposal contained in Clause 16 of the Income Tax (Amendment) Bill, 2023 resurfaced on Thursday last week after President Museveni returned the Bill which he, among other things, demanded that Parliament revisit its initial position that had thrown the same proposal out.
Among the companies that the government targets to scoop the said taxes from include Facebook, Twitter, Google, Netflix and Amazon, among other platforms which offer paid for services in Uganda.
In submissions made before the committee by the State Minister for Finance in charge of General Duties, Mr Henry Musasizi, legislators were informed that the government taxman, Uganda Revenue Authority (URA) hopes to collect Shs5 billion from the foreign-owned digital companies.
“I recommend that [you] approve clause 16 of the Income Tax Amendment bill, 2023, to provide for imposition of a tax on income from provision of digital services in Uganda derived by a non-resident person,” Minister Musasizi asked the MPs on the Finance committee.
He added: "We are saying that the 5 percent of that income that they earn here [in Uganda] should be left as taxes. It is different from other taxes we charge from resident companies and it is not a reintroduction of the Over the Top Tax [OTT] which we [government] terminated in 2021."
The reinstatement of the 5 percent tax proposal comes after President Museveni in letter read to Parliament on Thursday last week by Speaker Anita Among demanded that the proposal be returned.
“Clause 16 of the Bill which proposed the introduction of a tax on income derived from a non-resident person from provision of digital services in Uganda was rejected by Parliament. The measure was meant to cater for taxation of the digital economy such as Twitter, Amazon, Netflix etc,” Mr Museveni’s letter reads in part.
The same letter went on to state that “since it does not relate residents in Uganda as was mistakenly in the minority report, it should be reinstated.”
Consequently, the Speaker Among directed the Finance committee to expedite the re-processing of the same legislation and have it returned to the committee of the whole House for passing. The legislation is part of a raft tax legislations that are meant to define and guide taxman, URA on where and how to collect taxes in the financial Year 2023/2024 that commenced this month.
As Parliament processed the Bill early this year, the opposition wing led by the shadow Minster for Finance, Mr Muwanga Kivumbi through a minority report on the same supported by the Kampala Central MP, Mr Muhammad Nsereko dismissed the provision.
In their defense, the opposition reasoned that the provision, if passed, would have a trickle-down effect on Ugandans who happen to be consumers and or users of the services offered by the said digital companies.
This was eventually adopted by Parliament thereby defeating the government side but this has now returned to Parliament for reconsideration.
Much as the majority of the lawmakers on the Finance committee have pledged to support the same resolution, government side, including the Ministry of Finance officials were tasked to elaborate how they will defend it when it is tabled before Parliament for final re-consideration.
"As the committee, we did our part, we supported the minister but he failed to defend these issues on the floor of Parliament. I don't know what he is going to do now because we are going to make the same recommendations,” Kabula County MP, Mr Enos Asimwe.
“What are you going to do with the minority team that was against your position because you are presenting the same issues to us?" he asked the minister.
In a similar tone, Chekwii County legislator Mr Moses Aleper told Minister Musasizi that “you must convince us here and if you are not able to convince us, we have a meeting and see how we are going to support it."
No definitive approach on the same was made to the committee by the government.
Early last month, URA revealed that at least Shs5.8 million potential tax payers are not tapped into despite persistent efforts by government to expand the tax base and raise revenue to finance government programmes.