KAMPALA — Smile Telecom has committed to absorb the new 12% Excise Duty on internet, which is took effect Thursday July 1 2021.
In notice this week, Smile Communications said it will maintain its current data prices to enable clients stay online as they navigate COVID-19 disruptions.
The government started implementing the new 12% excise duty on airtime and internet data, among other fiscal measures for the year 2021/2022 that started Thursday July 1.
The new tax was part of the amendments in the Excise Duty Act and replaces the Over the Top Services Tax, or OTT.
“We will pay the new 12% tax at no cost to you. (subject to future reviews) and the current pricing of data bundles will not change,” a statement from Smile partly states.
The statement further reads that “At such a time when we are striving to survive the COVID-19 pandemic, absorbing the new tax will enable you to connect with friends ans family and conveniently work from home”.
Smile says the offer which is subject to review at later date will also support children with online studies, deliver daily tasks online among others.
Unlike OTT, which was paid separately by the user, the new tax is being paid at the time when the service provider completes the service delivery, according to section 4(4) of the Excise Duty Act.
“The provider of excisable services is liable to pay Excise duty on the earlier of; (a) the date on which the performance of the service is completed; (b) the date on which payment for the service is made; (c) the date on which the invoice is issued,” says the law.
Since 2018, subscribers have been required to pay a daily tax of 200 shillings ($0.055) to use any one of more than 50 OTT mobile communication apps.
These include social media services like Facebook, Twitter, and instant messaging and voice communication apps like WhatsApp, which are hugely popular in the country.
The government said the tax was intended to raise revenues and curb online gossip.
Since then, many Ugandans had resorted to using virtual private networks, which circumvents the government regulations like taxes and blocking of internet sites.
The Ministry of Finance, Planning and Economic Development says that the new tax is partly aimed at trapping internet users who had managed to escape payment of OTT.
Uganda Revenue Authority (URA) has also dismissed fears that data sharing will also attract multiple charges each time data is transferred to another phone or third user.
They say Excise duty is only paid once at the point of Purchase.
Therefore, when one has already bought the data and transfers it, no excise duty will apply.
The tax is expected to raise UGX. 60 billion this financial year.
In the first year of the controversial OTT tax, the government expected to raise at least UGX. 320 billion, but only UGX. 46 billion was collected, and this rose to 52 billion in 2020.
Administration of the tax measure became hard following protests from sections of the public against the tax, which they thought violated the rights to communication.