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Social media tax: Telecoms to lose most as URA proposes data charge increase, economists warn

Economist and lecturer at Makerere University,Dr Fred Muhumuza has cautioned that telecommunication firms are set to lose finannces as the Excise Duty Amendment Act sends wrong mixed messages among subscribers (FILE PHOTO)

KAMPALA – Telecommunications companies stand to lose the most from the current spate of mixed messages issued concerning the Excise Duty Amendment Act, a senior economist has warned.

On July 1, the Act which was passed in June by Parliament became operational, seeing a 1% levy on mobile money transactions and a Shs200 daily tax on all users of Over The Top services (social media).

The new taxes almost caught Ugandans off guard, attracting a backlash. Many vowed not to pay the OTT tax, opting to use virtual private networks, VPN.

Mobile Money vendors across the country also went up in arms demonstrating against the tax on transactions. They argued that the new levy had deeply affected the users of the service, many opting to hold onto their money.

Ms Rukia Namukasa, a mobile money user in Najjanankumbi, Kampala explains her dilemma: “I received Shs242,398 on Friday morning, a tax of Shs2,423.98 was cut, not to mention the money the sender was charged to send to my account. When I went to withdraw Shs140,000 off the amount I had just received, again a tax of Shs1,400 was levied and a fee of Shs3,575 was charged by the network. Basically between receiving and withdrawing Shs240,000, a whole Shs7398.98 was taken off an amount I was receiving for payment for goods which I had already paid tax for in the shop.”

Cries from Ugandans seem to have caught the attention of authorities who subsequently issued different statements explaining the new tax.

President Yoweri Museveni took to his social media page, calling on Ugandans to contribute to the growth of the eonomy by paying the social media tax. He however called for debate on a 0.5% levy on mobile money transactions instead of the 1% passed by Parliament.

Hours before the President issued the statement, tax body Uganda Revenue Authority also clarified that the tax on mobile money exempted deposits in personal accounts, transfers from bank account to mobile money account and payment of taxes.

A number of MPs who spoke to journalists admitted they did not understand the Bill during debate. While Finance minister Matia Kasaija, who assented to the Act.as.the sector head, later.dissowned the new tax on Mobile Money transactions calling them unfair to the user.

Dr Fred Muhumuza, an economist and lecturer at Makerere University, in an interview with PML Daily on Wednesday called upon telecom companies to distance themselves from the new taxes, especially the social.media tax, saying they are disruptive and wil affect revenues for the companies.

“Majority of social media subscribers in Ugands are struggling youth, who at most can only afford to spend Shs500 per day to stay connected,” Dr Muhumuza says, adding that an additional Shs200 to this subscriber is significant to their expenditure and therefore would force them to abandon using social media.

“If 1million subscribers stop using the service, that means Shs500 million in revenue will be lost everyday. How much is that a month?” Dr Muhumuza asks.

Dr Muhumuza’s comments come as URA instructed telecomms to embed the social media tax in data charges.

According to URA, the implementation of the social media tax payment needs to be reviewed since, according to the Excise Duty Law, the tax is indirect and should be incorporated in the final price.

Mr Ian Rumanyika, the URA head of public and corporate affairs, earlier this week said; “Telecom companies should be benchmarking how to make sure it is not felt by the consumer.”

Sources revealed to PML Daily that senior government officials on Thursday held a strategy meeting in Kampala to devise ways of streamlining the procedure of paying the social media tax.

Telecommunications companies however remain adamant that they are not aware of the proposal to review the method and would continue to charge the tax as earlier instructed by government.

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