Govt replaces OTT with 12% tax on data, airtime

State minister for planning, Amos Lugoloobi pictured at Kololo ahead of budget reading on June 10, 2021. PHOTO/ PARLIAMENT

The Ministry of Finance has slapped a harmonized excise duty rate of 12% on airtime, value-added services, and internet data as substitutes for Uganda’s controversially approved Over The Top (OTT) tax.

‘‘Some tax policy interventions to be implemented in FY2021/22 include rationalizing the excise duty regime on telecommunication services,’’ state minister for finance and economic planning,  Mr Amos Lugoloobi told MPs as he presented the 2021/22 national budget tailored towards industrialization for inclusive growth, employment and wealth creation.

However, the newly levied taxes that take effect July 1 will exclude access to data for internet portals providing medical and education services.

Introduced in 2018, OTT tax sought to regulate access to microblogging and social networking platforms like Twitter and Facebook but was fiercely welcomed with massive protests and rejection.

According to Uganda Communications Commission (UCC), over 7.5million internet users shunned the tax and instead opted for a Virtual Private Network (VPN), this- painting uncertainty over how tax compliance of over 21 million internet users in Uganda will be achieved. 

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Contentiously approved on May 7 by the 10th Parliament, critics and experts say the taxes-now- levied on telecommunication services will cripple e-commerce and fundamental freedoms.

‘‘I’ve never supported these internet taxes because they kill our innovation as a country. Much of our work today is data reliant. The future depends on internet. They just want to control us,’’ AV Performance analyst Bridget Nattabi, 25, argues.

In April, former state minister for Finance, Mr David Bahati told Daily Monitor that the new tax that’s expected to generate over Shs600billion of Uganda’s projected Shs22,425 billion domestic revenue collections – would be ‘virtually’ cheaper for citizens.

“From research, on a monthly basis, we use Shs8, 000. So in imposing 12 per cent, we’re actually charging Shs738, which is cheaper than when somebody is using OTT,’’ he said.

Over the next fiscal year, only Shs134.9 billion has been allocated to Uganda’s economic digitization ambition of the nation’s Shs44.7trillion budget. 

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‘‘The major priorities for Financial Year 2021/22 will include the extension of broadband ICT infrastructure up to the sub-county level; expanding the Digital Terrestrial Television and Radio Broadcasting network to facilitate tele-education for learners; and facilitating the development of software solutions to support electronic operations,’’ Mr Lugoolobi noted.

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