Government wrong on levying Social Media Tax on Users



In a bid to increase the tax base, the Parliament passed a law to tax social media users. The Users will be charged 200 shillings which is about $0.0531per day for services such as Facebook, Twitter and WhatsApp. That amounts to around $19 per year. It is also estimated that internet users in Uganda have increased from 16 .4 Million to 17.1 Million in 2017. This simply means available market for the digital economy and as such, the digital and telecom companies are earning revenues (that should be taxed) from subscriptions, advertisements among others. There is everything wrong with the social media tax. The tax contradicts the National Information and Communications Technology Policy 2014, which emphasizes that ICT relates to human rights and supports freedom of expression and the right of access to information, boosts trade, political, economic and social life of Ugandans. Here is why this tax is unpleasant.

First, this kind of tax risks being double taxation as users have to buy data using airtime-which is off mobile money, and yet mobile money transactions are already taxed at 1%. This is expressly a negative element of a tax system which should at all times be avoided.

Secondly, the tax should be borne by the site and platform owners, and not the users. The site owners accrue income from their sites. Whether Facebook or twitter or any other social site, they generate income which is taxable. For example, Facebook made about $5.85 billion in advertising revenue from overseas users in 2017. This is about a 1/5 of Uganda’s GDP standing at $25.53 billion (2016). What this means is that the over 2 million Ugandan users participated in generating this income. Government should be aware that in other jurisdictions, the move to tax these giant digital companies fetches more revenues than targeting the poor users! Considering our legal regime on taxation, social sites such as facebook, twitter and any other such as Uber, much as they appear to be non-residents, they derive part of their business incomes from the Ugandan users through advertising portfolios and other futures (if you use facebook, you know what boosting posts means-you pay in dollars). Therefore, the Income Tax Act Cap, 340 is applicable. Why is the government missing the point? Is it protecting the corporates and going for the soft targets-the users? These corporate digital companies should pay the tax and not the users!

Thirdly, one of the major drivers to achieving middle income status is the use of ICT. No wonder, the Ministry of Science and ICT has always encouraged MDAs and citizens to embrace ICT and technology thereby promoting the use of Facebook, twitter, WhatsApp and other platforms for business and information. Are government agencies, who have in the recent past defaulted over 300 Billion shillings in tax going to pay this social media tax as well? Aren’t we driving this bus backwards? Not to mention that Uganda has the highest data cost in the region, and with this high cost, Ugandans have tried so hard to ensure they keep connected in order to get information and also boost production. I have for the last 4 years shopped online and used many platforms including WhatsApp and Facebook and Twitter. Many Ugandans have benefited from my on-line shopping and taxing me on social media use, will therefore mean loss of market of Ugandans who are trying to compete in this very competitive East African Market. While reading the 2018/19 Budget, the minister of Finance noted that one of the key challenges to economic growth is the Low entrepreneurial knowledge and limited application of technologies in production processes; so, by taxing users for use of such avenues of technology will actually worsen the situation and the minister will report the same challenges next year. Therefore, Government should revisit this tax immediately with the alternative of taxing the social media platform owners-for they will generate more revenue than taxing the users! This is what progressive governments and societies do, they invest in digital technologies and also encourage their citizens to embrace the same and then harvest the tax from the owners and not the Users! If we are to insist on taxing users over social media tax, then let us forget reaching middle income status, for we are taking steps backwards in terms of economic development!

By
Michael Aboneka Jr

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