Gov’t to drop OTT, replace it with 12% tax on internet data

The government has proposed to scrap off the payment of Over the Top Services (OTT) and replace it with the Excise Duty (Amendment) Bill, 2021 in the coming financial year 2021/2022.

The new bill which will be tabled on the floor of Parliament on Thursday by the Minister of Finance Matia Kasaija also proposes the re-introduction of excise duty at a rate of 12 percent on internet data as a counteract measure to adverse the effects of OTT.

The Over the Top Services (OTT) or social media tax was first introduced in 2018 and caused a nationwide protests headed by Kyadondo East MP Robert Kyagulanyi. Sections of the public then demanded a reconsideration of the Excise Duty (Amendment) Act, 2018 with a view of removing the Shs200 over the Top (OTT) tax that came into effect on July 1, 2018.

The new proposal by the government to repeal the Shs200 tax follows last year’s revelation to Parliament’s Finance Committee about plans to drop the Over the Top Tax (OTT) and instead impose a direct tax on mobile data.

The revelation was made by the then Uganda Revenue Authority (URA) Commissioner General, Ms Doris Akol who underscored the need to have the tax policy reviewed since it was not performing well.

“Proposing to amend Schedule Two of the Excise Duty Act to look at possibly putting excise duty on data…this would counteract the effects of OTT and make it a bit more efficient to collect tax on data instead of the OTT which is highly evaded and is not performing well,” Ms Akol said then.

In July 2019, URA reported a collection of only 49.5 billion Shillings out of the targeted 284 Billion Shillings from OTT.

This meant that URA was unable to collect 234 billion from this tax measure, a shortfall of 83 per cent from the estimates.

According to the URA, many Ugandans resorted to using Virtual Private Networks (VPN) and wireless networks in their offices to avoid paying the tax. For OTT, every Ugandan using social media platforms like Facebook, and WhatsApp was expected to pay 200 Shillings daily.