New Mobile Taxes To Cripple Digital Inclusion In Uganda

Uganda is one of the most celebrated African stories on digital and financial inclusion, following the liberalisation of the telecommunications sector by the government of Uganda in the early 90s.  But this party may soon come to an end if no intervention from the same regime.

On July 1, the government introduced two new controversial taxes among others that have the potential to rapidly reverse internet penetration and financial inclusion gains that have been registered over the last decade.

The taxes include; the infamous Over The Top (OTT) service tax or social media tax of Ugx200 (0.05 cents) per day or Ugx6,000 ($1.6) per month and the 1% mobile money tax on deposit, transfer and withdrawal of any amount of electronic cash moved by mobile telephony networks like MTN and Airtel.

The justification for the introduction of the taxes by President Museveni, the head of state, is the need to widen the current tax base and stop tax evasion by mobile telephone companies operating in Uganda.  The national budget for the current financial year stands at shs32 trillion of which shs17.5 trillion can be financed by taxes while the balance is expected to be financed through borrowing from abroad, the domestic market as well as donations. The third reason advanced by the President, among the many is that, “Social media chatting is a luxury by those who are enjoying themselves or those who are malicious.”

To put the relevance of mobile money and the social media or the internet into context, let’s look at the hard facts. Uganda has an estimated population of 40.9 million people. According to the Uganda Communication Commission, the regulatory authority of ICT services, the country has over 18.1 million internet users. This figure translates to an internet penetration rate of 48.2 internet users per 100 inhabitants according to the Market industry report of Q3 report, 2017. Of this users, it’s estimated that up to 3 million Ugandans use social media with Facebook, in the lead followed by WhatApp, Pinterest and Twitter.

Last year, the total value of mobile money transactions grew to UGX16.7 trillion (US$4.4 billion) from UgX14.5 trillion ($3.7 billion) by September. Unlike the internet market, the mobile money market is also a significant employer offering a livelihood to over 151,644 mobile agents countrywide.

The introduction of these specific taxes is forecast to suffocate the use of both mobile money services and the use of social media as well as other internet services. Ugandans who are both tax and cost averse have already started shunning the use of mobile money services as well as reduced the usage of internet services – to be specific, the use of social media which is the main reason most Ugandans go online. Many have also found alternatives in the use of Virtual Private Networks (VPN) services to evade the new taxes on social media an effort to continue enjoying their internet rights.

Lower uptake of these services has implication on direct employment and purchasing power of the informal sector which relies on the few employees in the formal sector for handouts. By all means, thousands of mobile money agents are bound to lose their jobs when they experience a steep decline in revenue from the service.

On the other hand, freedom of expression through online media is bound to suffer a great deal while Ugandans such as social media influencers, artists who earn a living through social media face the hurdle of surviving in a market of declining audiences that brands like to tap into, to increase awareness about products and services.

On the autonomous front, Uganda’s social media tax sets a bad precedent for democracy in Africa especially among countries governed by leaders whose reigns are threatened by citizen journalism and the power of social media. Nonetheless, the on-going controversial statements by different government department heads and the head of state about the new taxes in response to the public uproar about the irrational taxes, it’s only a matter of time before the unpopular taxes are reversed or dropped.

Mr. Walter Wafula

Public Relations and Communications Professional,

Kampala, Uganda