How 12% Internet Bundles Tax will Suffocate Uganda’s Digital Space Starting July 01

By Paul Ssenabulya

Effective July 01, 2021, Uganda’s newly approved taxes will start biting internet users.

Since I am not an economist, I will focus on the 12 per cent levy on internet bundles, replacing Over the Top tax (OTT) commonly known as the Social Media Tax.

The new Internet Access Tax is one of those new levies that government of Uganda has introduced to widen the tax base and increase revenue to boost service delivery and foster infrastructure development.

With Uganda’s staggering public debt standing at Shs65 trillion in April 2021 up from Shs49 trillion in 2019, and expected to increase, looks at over new taxes as a way to service debts.

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Approved by parliament in April 2020 under the Excise duty (Amendment) Bill 2021, the 12 per cent duty on internet data bundles will see Ugandans – whether using social media or not – start paying taxes before accessing internet in Uganda.

The new tax will further impede access to internet in Uganda at a time when the Covid19 pandemic has pushed many institutions, businesses and organizations to resort to online platforms to remain operational.

Currently, Ugandans can do banking, shopping, studying, meetings and other things online because technology comes with new improvements to ease work.

However, studying, information and news access, watching TV, listening to radio, holding meetings and other activities will be stifled further by the new tax which will make internet more expensive and less accessible.

In 2018, government introduced OTT tax as a way of, among others, raising between Shs400 billion and Shs1.4 trillion from social media users annually.

The OTT tax was attributed to the increasingly critical citizenry which President Museveni accused of engaging in too much untaxed gossip (Lugambo) on social media.

Government failed to meet the tax revenue target set since a considerable number of Ugandans resorted to Virtual Private Networks (VPN) to bypass the daily Shs200 for anyone to access social media apps like LinkedIn, Telegram, Whatsapp, Twitter and Facebook.

This new Internet Access Tax will be difficult to bypass and Ugandans will have no other option but to pay or quit.

According to Uganda’s communications regulator UCC, by the second quarter of 2020, Uganda had 18.9 Million Mobile Internet subscribers which is indeed a bigger tax base for the country grappling with a high appetite for loans and growing public debt burden.

But not all these will afford or even accept to pay for expensive data bundles.

So, what lies ahead? As Covid-19 continues to ravage the world and Uganda in particular, with businesses opting to survive with the help of online platforms, accessing them will become more difficult because of the high price of data bundles.

The growing digital space which has seen banking, studying, shopping, delivery, online newspapers, television, meetings, listening to radio all accessible online will suffer.

Both markets and audiences will go down and businesses will be stifled as the 12 per cent Internet Access Tax takes effect on July 01, 2021.

For journalism, several newsrooms had shifted focus to online platforms to stay afloat with increased subscription to e-papers, live streaming on Facebook and Youtube and online broadcasting, but all these will feel the pinch of the new tax which will suffocate the industry further.

The digital space for both the industry and the audience will survive at the mercy of government which is only looking at raising tax revenue, while giving a blind eye to the real impacts of the levies on the common Ugandan who already grapples with paying the other taxes like VAT, PAYE, Capital gains tax, rental taxes, excise duty, import duty, among others.

Moving forward, the new tax raises questions as the Covid19 lockdown continues to bite. How will studying online be possible for the struggling education sector? How will working from home be possible? How will praying and meeting online be possible? How will shopping and delivery online be really possible? How will innovations and tech research and businesses thrive? How will online news sites and news apps stay in business?

Even after the lockdown, all the above unanswered questions will make subscribing for data bundles in Uganda a luxury.

It will be so difficult for those who earn a living on the internet to survive amidst the new normal ushered in by the Covid-19 pandemic.

Many countries facing the reality of the Covid-19 after effects are making internet more accessible to foster economic recovery.

Yet for Uganda, the story is different.

The Writer is a Journalist and a Content Editor at Opera News based at Nairobi

Email: ssenapaul26@gmail.com

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