On July 26th last year, the former ICT Minister Hon Frank K Tumwebaze came out to unveil certain information in regards to OTT tax and how its removal won’t influence data Prices. Ever since this tax was introduced, it was bound to fail. He also disclosed that his ministry has been fighting this tax internally with the ministry of finance in vain but also feels that if this tax would be removed it would good as it would increase the rate of internet penetration in the country.
The government imposed a social media tax also known as OTT tax and required one to pay a daily Social Media Tax of UGX 200/=, UGX 6,000 per month or UGX 73,000 per year. However, the statistics indicate only UGX 4.4 B collected was Social media Tax as of July last year of the projected UGX 8.3 billion. Government’s yearly target was to collect UGX 100 billion and was UGX 52.8 billion away from realization if this trend continued.
While appearing before the Parliamentary Finance Committee presenting the budget framework paper for the Financial Year 2020/2021, URA commissioner general Doris Akol proposed to the committee that the failed OTT tax should instead be imposed on data bundles to avoid tax evasion using VPNs.
One doesn’t have to be an economist to see that this tax is counterproductive and wouldn’t fetch the projected revenues. Fortunately, the market always exposes the thoughtlessness of such decisions which it has done.
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The problem with this is that all data bundles are already being taxed and brings about issues of double taxation. This means that the initial forecasts of this tax was based on the wrong figures. Like the widely shared industry statistics on the number of internet subscriptions. Secondly the figure needed to have been arrived to after knowing Uganda’s DAU (Daily Active Users) per OTT platform. At UGX 49.6 Billion it means about 700,000 users per the tax per day over the course of 365 days, moving that number to 1 million users (OTT Tax Payers) would give them a good cushion. The UGX 284 bn project figure was always going to be a tall order for the tax base to handle.
Do you think OTT tax can instead be levied on internet bundles directly?
