MBALE – On April 29 April, the Parliament of Uganda gave us what we used to call “Term Egenda Nebyayo”- loosely translated to mean a term ends with what is in it- by trashing the infamous Over the Top Services (OTT) and replacing it with the a 12% tax on internet data bundle.
This was contained in an amendment of the Excise Duty Act that we shall in future refer to as “The Excise Duty (Amendment) Bill 2021” now waiting for a Presidential assent to become a law and operational on 1st July 2021.
The proposal to drop OTT tax in favor of a direct tax on internet bundles was the brainchild of Doris Akol the former Commissioner General of the Uganda Revenue Authority on the ground that there was a lot of resistance and evasion on the part of users who had resorted to Virtual Private Networks and wireless networks to avoid paying the tax.
But I didn’t see the gist of Akol’s fears more so that OTT was just another tax on top of those that were already in place.
Should Ugandans start celebrating the removal of OTT or it is a cause for alarm more so that the same has been replaced with a more oppressive tax? According to the Excise Duty (Amendment) Bill 2021, a 12% tax will be levied on all internet data bundles with the exception of data meant for research, educational and medical purposes.
The criterion for determining whether or not the data is for purposes of the exceptions in my view is an ambiguity that this particular amendment has not cured if at all.
The amendment of the law in effect has repealed the provision in the Excise Duty Act which required users in Uganda to pay a daily 200sh as OTT tax in order to access social media platforms such as Whatsapp, Facebook, Twitter, and Instagram among others if one was not using the God sent Virtual Private Networks (VPN).
The decision to repeal the OTT tax, while at the same time introducing excise duty on internet data at a rate of 12% means no one will escape the tax irrespective of age, sex, status, and nationality provided one is in Uganda.
There is no doubt, the amendment of the law to introduce a 12% direct levy on data dandles may appear a much more effective and fair way to collect revenue from the service providers but the entire plan has a long term effect of stifling national and international aspirations on internet access.
Most importantly, almost all these service providers are foreign companies whose motive is to maximize profits; they will certainly push the burden on the consumer of their services by increasing the charges on purchase of data.
This would discourage Internet usage and thereby suppress Uganda’s quest for digital transformation.
By abandoning the OTT tax, the government has in effect admitted to failing to ban the use of VPN in Uganda which had been the biggest hindrance to OTT.
However, internet users in Uganda should be aware that the new tax would not be avoidable through the use of a VPN. So long as one is using internet through a certain provider, that provider is now under duty to charge the 12% tax on all data bundles bought at any given time.
On the face of it, this Over the Top was the most hated tax ever in the history of Uganda only comparable to the infamous graduated tax that was considered oppressive and discriminatory in Uganda’s past tax regimes.
Retired but not tired Col. Kiiza Besigye will be remembered for having included the removal of graduated tax in his manifesto which pushed the Government to replace it with other taxes.
Mr Robert Kyagulanyi aka Bobi Wine will also be remembered for having put up a spirited fight against OTT tax until it was dropped on Thursday just before his title could change to former Member of Parliament.
In a nutshell, the tax has finally been buried and reincarnated in another form, thanks be to the government’s failure to block the free VPN service. Infact the promoters of OTT must be cursing the day they pushed through the tax without carrying out wide consultations.
One of the spill-overs of the tax saw many politicians lose support in the just concluded general elections; the tax was bound to face further resistance from users.
Although it is evident that many people had learnt to co-exist with OTT, it is clear that the government had not achieved the purpose for which it was invented hence the need to replace it with another.
A survey by Ubantu Services showed that out of the slightly more than 20 million internet subscribers in Uganda, about 8 million of these were not paying the 200sh daily tax in favour of the free of charge Virtual Private Networks.
It is on record that the imposition of the tax had resulted in a decline in the number of internet users, failed revenue targets, and social unrest due to its oppressive nature.
Infact the Uganda Revenue Authority, which had set a goal of collecting shs284 billion from the tax, was able to realize only shs49.5 billion as taxes from OTT. My view is that shs284 billion in just one year was not bad money especially that it was additional revenue collected by URA.
The promoters of the tax must have advised government to repackage the same tax by dressing it in a more attractive cloth, giving it another name, making it more inclusive/acceptable so that every internet subscriber can pay for it at source like it was with the additional tax on fuel. The tax as repackaged shall be charged at source and every one irrespective of age and status shall be obliged to pay it unknowingly.
It is a tale of new wine in old bottles where consumers will not realize that they are paying even more for the same service than what they were spending on OTT. They say, a rose flower known by any other name remains a rose with a good scent and very attractive but with thorns around it and this is why Ugandans should be worried.
Aware that their term of office had come to an end, the same MPS who had amended the Excise Duty Act to include OTT had again taken a decision to drop the payment of OTT tax. I do not think these MPs took note of the likely implications associated with the new 12% tax in the after math of covid-19 inconveniences and the digital era.
I can guarantee that this tax will have far reaching consequences on a population that had become so comfortable working from home through the use of the internet. The tax comes against a backdrop that government was looking for over 200 million for the purchase of motor vehicles for each member of the 11th Parliament. Many of those who allowed the bill to go through without much huddle were re-elected and could not oppose any plans by government to identify sources of money to meet their demands as MPs for the next 5 years.
As the country is trying to recover from the effects of COVID-19 pandemic which saw Uganda go into a lockdown, so many sectors of the economy were affected and need to be revamped.
Many businesses were forced to close leaving employers with no option but to restructure and drop some employees. Many commercial buildings in the town centers were left empty as Ugandans resorted to working from home.
Not knowing when the economy would recover, many Ugandans had resorted to doing most of their work on phone and on computers as well as marketing their goods and services on social media with the help of the internet.
I agree with the school of thought that due to the slump in consumption and trade, URA has failed to meet its targets, tax revenues have fallen, forcing the government to borrow large sums to fund their budget projections.
One would have expected the government to cut back on non-priority spending and focus expenditures on critical services like health, education, water and electricity, supporting the recovery of the economy but this is not what we are seeing.
Without any shame, our government is behaving arrogantly as if it is business as usual. They have largely remained extravagant and are inventing new taxes to extort money from the already impoverished population surviving on a bare minimum.
The increased use of digital technology during the COVID-19 lockdown such as mobile money, on-line shopping, on-line education, and disease surveillance and monitoring should have showed the government that affordable internet services are now a necessity and shows the great potential to aid faster economic recovery and strengthen resilience against similar shocks.
There is no doubt digital technologies can help in the recovery of the economy through use of data from mobile network operators for more effective epidemiological surveillance and outbreak control.
At the moment, access to digital technologies remains limited for many Ugandans, who find mobile services to be unaffordable and I believe this tax is going to make it harder.
In 2019, less than 70% of the population had access to mobile phones compared to an average of 84% of the population in the East Africa region.
Nevertheless, increased taxes on social media access inhibit making digital products and services affordable for all Ugandans yet the internet is the future of Uganda. Since banks also rely on the same internet to operate their agent banking systems and ATMS, this tax is going to hike costs for almost everything that relies on the internet.
The developments of the Single Digital Market that Ugandans were anxious to tap into to gain access to an additional 200 million consumers and increase choices for Ugandan consumers will be hindered and Ugandan mobile broadband subscribers would miss out on a chance to gain financially through lower prices which can only be accessed through affordable internet.
COVID-19 is an unprecedented global crisis and uncertainty about when it will be wiped persists with an Indian covid 19 Variant already in Uganda. Nobody knows how much harm it could cause and whether or not it will call for another lockdown.
Through greater integration of digital technologies in scaling up health solutions and digitalizing the traditional business models, Uganda can accelerate its economic recovery and advance the frontier of its digital transformation with affordable internet.
We just have to be tolerant and alert; the problem of covid 19 is far from over, we cannot afford to relent or amend our laws to stifle economic progress of the people from whom the government collects taxes. It is not fair to milk a cow without feeding it or leaving some milk for its calf.
I don’t want to believe the Excise Duty (Amendment) Bill 2021 is a political stunt intended to repair Museveni’s image after the disputed elections.
And I hope the purpose is not to portray him a good man who will release all those arrested in the election violence and in the unlikely event that he will refuse to assent to the law before or immediately after swearing in. No Government should be allowed to use a tax regime to oppress, impoverish and to enslave its own people.
The author, Rogers Wadada is a Human Rights Activist and Politician