Telecommunication giants MTN Uganda and Airtel Uganda have announced that the unpopular over-the-top tax (OTT) has been scrapped following a new 12% tax imposed on internet services by the government in the new budget.
The government in April this year passed a resolution to drop OTT Tax and instead levy a 12% tax on internet/data bundles. The tax is one of the seven tax amendments the government will pass on 01 July, when the next financial year starts.
Under the proposal, internet bundles used for medical and education services will be exempted —and won’t incur the 12 percent levy.
MTN, and Airtel announced that effective Thursday, July 1, the daily, weekly, monthly, quarterly, and annual OTT tax payments will be no more as the new fiscal year 2021/22 begins.
“Please note that since the month is soon coming to an end and therefore it is less than a week, that’s why we have only the daily option left. Effective July 1, there will be no more OTT,” Airtel said in a social media post.
The unpopular OTT tax was introduced in 2018 when government slapped a sh200 OTT Tax on services such as Facebook, Twitter, WhatsApp among others causing a nationwide uproar and protests.
A section of the public then demanded a reconsideration of the Excise Duty Act, 2018 with a view of removing the sh200 OTT tax.
Starting July, the government has slapped a 12% excise duty on internet data, except data for the provision of medical services and education services.
The proposal to repeal the OTT tax came after a Market Performance Report issued by the Uganda Communications Commission indicated that the number of internet subscribers not paying the tax was at least 7.6 million of the targeted 18.9 million subscribers. Subscribers circumvent the tax by accessing OTT services using VPNs or utilizing Wi-Fi —which is not subjected to OTT tax.
Uganda Revenue Authority (URA) said the levy has been performing poorly due to users opting to use VPNs or utilizing Wi-Fi, thus proposing to drop the tax and instead levy internet bundles.
However, it remains uncertain how the internet providers will distinguish data used for medical or education at the point of sale.