Internet users who have been evading paying the daily Shs 200 Over the Top Tax (OTT) through the use of Virtual Private Networks (VPN) have now become been cornered with the new 12% excise duty on internet usage, ministry of Finance, Planning and Economic Development has said.
OTT was introduced in 2018 amid protests from the public and civil society, who argued that it was a violation of right to information and would limit the growth of IT-based communication. The tax mainly targeted social media users who were accessing it through their mobile phones.
Three years later, the tax has now been scrapped effective July 1 after government realized less than a fifth of the anticipated Shs 248 billion in the first year of implementation. The matter was worsened by switching off social media and internet ahead of general elections in January.
Many have since continued using VPN since it is the only way they can access the most popular social media site, Facebook, which remains blocked by the government to date.
The director of economic affairs at ministry of Finance, Moses Kaggwa says while the new internet tax expected to reduce on the tax administration challenges and increase revenues, it will plug the revenue gap left by the VPN users.
"We really thought so long and hard about it, then we said it is not going to hurt because the cost of data has consistently been going down. There was a time when we were paying $300 per gigabyte but now things have gone down to about $100. As the cost of data goes down, the amount of tax you're going to pay dramatically goes down. Actually, the impact will be minimal but the little bit of revenue will also resolve administrative issues because people, first of all, people were circumventing OTT by using VPN. Others; one person would have OTT and they avoid it by using the phone as a hotspot for like 3-4 people. All these tricks people have been using have now gone," said Kaggwa.
Kaggwa also gave justification that the new tax and the removal of OTT followed public complaints that it was stifling communication, and therefore, the ministry thought the excise duty would make it easier for the internet users. But he also says OTT was unfair because users like students were suffering more than others, adding that the new measure will not hurt particular groups.
Former Agriculture minister, Victoria Sekitoleko, expressed concern at the rate government is changing policies, hardly giving any chance for them to bear fruit and be evaluated.
Sekitoleko reminded government to first give back what it owes the private sector so that to revive economic activity. The private sector demands more than Shs 4 trillion for supplies and services made to the government over years. Sekitoleko is also worried about the failure of the government to fight corruption.
There are growing calls on the government to improve the relationship between the tax sector and the public so that Ugandans can find paying taxes more attractive. This would also increase compliance, reduce the cost of administration and enforcement and in the end lead to higher tax revenues.
The assistant commissioner for domestic taxes department, James Odongo, said the tax body has improved its tax education drives but will continue introducing more outreach programs to reach more people.
URA commissioner legal services, Patience Tumusiime admitted that corruption persists but cited tax agents as the main culprits. She says however that measures including stricter screenings have been employed and next year, they hope the problem will be reduced.
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