BIG STORY: Inside the 7 new taxes Gov’t intends to impose on Ugandans

The government is proposing to drop the widely-opposed Over-The-Top (OTT) tax for social media access in Uganda, but impose a 12% excise duty on Internet data bundles.

The plan to scrap the OTT tax, which Uganda Revenue Authority (URA) said had yielded less-than-expected revenue, was among a raft of proposed tax measures in the Tax Bills that Finance Minister Matia Kasaija tabled in Parliament yesterday.

The tax on Internet bundles is one of the seven new taxes that the government wants to apply from July 1 – when the next financial year starts – should Members of Parliament approve it.

The other proposed tax heads are on exports of processed gold, unprocessed minerals, wheat, leaf tobacco, fish maw and milling by-products.

The Tax Amendment Bills tabled yesterday include Excise Duty Amendment Bill, 2021; Fish Amendment Bill, 2021; External Trade Amendment Bill, 2021; Income Tax Amendment Bill, 2021; Mining Amendment Bill, 2021; Stamp Duty Amendment Bill, 2021; and, Tax Appeals Tribunal Amendment Bill, 2021.

Others are Tax Procedures Code Amendment Bill, 2021; Tobacco Control Amendment Bill, 2021, Traffic and Road Safety Amendment Bill, 2021; and, Value Added Tax Amendment Bill, 2021.

The proposal to repeal the OTT tax comes months after a Market Performance Report issued by the Uganda Communications Commission (UCC) indicated that the number of Internet subscribers who are not paying the tax was at least 7.6m  of the target 18.9m subscribers.

Such subscribers circumvent the tax by accessing social media sites using private virtual networks (VPN) or utilising Wifi, which is not subjected to OTT tax.

In the Bills that Speaker Rebecca Kadaga sent to the Parliamentary Committee on Finance, Planning and Economic Development, the government did not indicate how much it intends to collect from the levy on Internet bundles.
Under the proposals, Internet bundles used for medical and education services will be exempted from the 12% levy.

Since the government shutdown of the Internet a few days to the January 14 elections, many Ugandans have opted to remain on VPN, which is likely to negatively affect tax collection in the final two quarters of the 2020/2021 financial year.

Although social media was re-opened by the end of January, the government has continuously blocked the use of Facebook in Uganda after the social networking site took down accounts of supporters of President Museveni in the run-up to the 2021 elections.

Meanwhile, the government is proposing a 30%or Shs230 tax on each litre of beer which is likely to result in an increase on the factory price of alcoholic beverage in the wake of year-long closure of bars due to the pandemic.
The same levy is being proposed on other alcoholic drinks that are locally produced. There will be a 12% or Shs250 tax on each litre of locally-produced non-alcoholic drinks.

This excise duty has not spared other fermented beverages that include cider, perry, mead, pears or near beer.  A litre of these beverages under the new proposal would attract a 60% or Shs950 tax.

Rental tax raised

The government has also proposed 10 percentage point increase in rental income to 30% which landlords are likely to transfer to tenants.  

In addition, landlords with two or more rented properties will be required to account for them and pay the tax for each building separately.

The rental tax hike proposal comes at a time when Parliament is reconsidering the Landlord and Tenants Bill, 2019 that President Museveni returned for re-consideration by Parliament following his disagreement with the definition of residential premises.

The legislation has a provision that protects tenants against sudden hike in rent, limiting an increment to 10 percent, while a defaulting tenant can only be evicted by a landlord on the orders of court.

THE NEW TAXES PROPOSED

Finance Minister, Hon Kasaija also proposes a new tax on exports by causing amendments to the Mining Act, 2003; the Fish Act; and, the Tobacco Control Act; and, the External Trade Act.

Concerning the Mining Amendment Bill, 2021, the government wants URA to collect $200 (Shs728,968) on each kilogramme of processed gold and 1 per cent of the value of unprocessed minerals being exported from Uganda.

With the fish maws increasingly attracting market across the Asian continent, the government is proposing to amend the Fish Act by introducing an export levy of Shs70,000 per kilogramme of fish maw whereas the Tobacco Control Act is set to be amended so that a tax of $0.8 (Shs3,000) is slapped on a kilogramme of leaf tobacco.

The External Trade Act is also proposed for amendment in order to tax export of wheat bran, cotton cake, maize bran and other by-products of the milling industry by $0.4 (Shs1,500) per kilogramme. The same proposal will see the government collect tax of Shs100 per kilogramme of wheat grain.