Ever since the government introduced the much controversial Social Media tax also known as Over the Top (OTT Tax) in Uganda a lot has happened; from the protects by some youth, low financial contribution to the tax base and use of VPNs among other issues. While speaking to BBC East Africa, Uganda Communications Commission (UCC) Executive Director Mr Mutabazi Godfrey has come out to clear the air on all that has happened since this tax was introduced.
Internet users Vs OTT tax collection
One of the concerns is on the figures reported by UCC is of internet users that appear to be very high in spite of the introduction of the OTT Tax. The figures used in the reports published by the Commission are aggregated quarterly from the data reported by licensed Mobile Network Operators of active internet Subscriptions. Operators have a license requirement to make monthly operational reporting to the Commission Mr Mutabazi detailed.
He said that the figures shown by UCC include all internet access subscriptions both for mobile internet subscribers and fixed internet subscribers. They consist of both social media access and access to other areas of the world wide web. The OTT Tax is only on the Over The Top services and not the internet in general. Therefore, the levy, having not been applied to every aspect of internet access, allowed for subscribers to continue using the internet generally even without paying the Social Media Tax.
“However, from the operator monthly reports collaborated by the URA collections, there was a reported decline of users of social media services in the quarter July – September 2018 immediately following the implementation of the Social Media Tax. The decrease was of users who were previously active Social Media users, but following the implementation of the tax, they were not reported to have paid the daily, weekly or monthly tax to access Social Media. ” Mr Mutabazi said.
The VPN effect
UCC knows Ugandans evade this tax and are using alternative means by which they access Social Media primarily through VPN or shared Wi-Fi platforms. These subscribers would ordinarily be reported under the total internet users which therefore remained high but not published under the social media subscription figures due to use of VPNs by Ugandans.
Why the Tax was introduced
Mr Mutabazi acknowledges that the telecommunications sector is a significant tax contributor to the economy, and he disclosed that these taxes are charged at varying levels based on the type of telecommunication service offered in the market. As a result, traditional voice service was a significant contributor in taxes both at a local and international traffic scale but with the convergence of technology and services were voice is moving from traditional Public Switched Telephone Network (PSTN), or the traditional circuit-switched telephone network to Internet Protocol (IP) networks, the emergence of OTTs have affected government targeted tax collections with a reported decline from telecom services over the years.
The issue of tax decline on traditional voice networks ha snot affected Uganda only as many countries in the world are struggling with the decline in the contribution by telecom operators to the government due to the convergence of services. Mutabazi also noted that this is not unique to Uganda. He said,
“Moreover, more so because this contribution is moving offshore to the platforms where OTT providers, like Whatsapp, Facebook and the like reside. As other countries continue to analyze, Uganda made the move to introduce the tax so as to ensure that the government can recover part of the telecom contributions that have been affected by the convergence of technology in light of the country’s inability to charge Whatsapp and Facebook directly a portion of the revenue generated from Ugandan subscribers.”
He disclosed that, countries around the world are in discussion to establish means by which these OTT providers can be charged legally a portion of the revenue generated as a result of the use of their platforms by local citizens to recover the loss of government taxation.
OTT Tax not political
The UCC ED clarified that the OTT Tax is undoubtedly not political and that it has nothing to do with freedoms of speech. He believes that Ugandans should be more concerned that the wealthiest and most productive international companies which happen to be OTT platforms, e.g. Facebook, Whatsapp, Instagram etc., have eroded Uganda’s taxation potential for communication services. This is a significant reality that is being discussed world over.
Companies like Facebook or Snapchat do not make any contributions to the government of Uganda in the form of taxes, and yet have leveraged off their subscription numbers, which include our local citizen figures, to generate their substantial revenues.
Since there are no international treaties that support the taxing of global companies that deliver services off global IP platforms, Mr Mutabazi said that the government surely needed to address the tax collection gap hence the reason to introduce the OTT Tax.
Further discussions are being held locally, regionally and internationally to agree on how to address contributions to the government by these companies so as not to appear to penalize citizens in settlement of this levy, He said.
The UCC ED was happy to see the fruits of the dialogue between his commission and telecom has led to introducing Social Media Bundles that come with the OTT Tax inbuilt without excessive price increases.
){kind=link}