What you need to know:
- The issue: Facebook ban
- Our view: For Uganda to yield the tax benefits while also facilitating the population to do business and make money, there is a need to build an environment of certainty.
Prior to its indefinite suspension by the authorities, more than one year ago, Facebook was the most used social media platform in Uganda.
Since the move by the government, many users have since quit or use Virtual Private Networks (VPNs) to access the platform. In suspending Facebook, the government made its case claiming that the social media giant refused to restore the government of Uganda and the ruling National Resistance Movement (NRM) online accounts during the General Election.
There have been reports that the authorities have been engaging the managers of the platform to find an amicable solution. We do not intend to argue the pros and cons of that process and neither do we want to apportion blame. It is unproductive. The most important question is who is the biggest loser? It is the more than 3 million Ugandans who used the platform prior to its suspension. It is the small and medium enterprises (SME) engaged in e-commerce trade, the advertisers looking for buyers that are losers.
Government view of platforms like Facebook appears to be changing from seeing them as tools for occasional bans or as President Museveni likes to put it, platforms for rumour mongering. They are now seen as a source of revenue hence the tax.
The tax is expected to stretch over websites, web hosting software firms, and those supplying images, text and information including self-education packages, music, film, gambling, and other broadcasts and events digital platforms, as well as companies on remote maintenance of programs and equipment.
Under section 16 (2) of the VAT Act, a non-resident person who supplies electronic services to a non-taxable person in Uganda makes a taxable supply. Such a supplier is therefore required to charge VAT on the supply, file quarterly returns, and pay VAT due on supply within fifteen from the end of each quarter.
Government says it has established mechanisms to start collecting Value Added Tax from non-resident service provider companies operating in the nation’s economy, including Facebook.
There are arguments to be made for and against the tax including the effect of the taxes on the promotion of digital payments and e-commerce which are largely at the introduction phase in the country. The cost of quality internet is still high and access to devices is limited mostly to urban centres.
Taxing digital services such as online streaming, digital advertising, and e-commerce among others therefore has negative and positive effects. Our view is that for Uganda to yield the tax benefits while also facilitating the population to do business and make money, there is a need to build an environment of certainty. That entails assurances that these platforms will not be blocked at every election cycle or when the government has concerns. That starts with unblocking Facebook.