COMMENT: More on OTT and Mobile money taxes

A tax which is not in pursuit of clear objectives is illogical and should be condemned

COMMENT | JOSEPH BOSSA | Until recently, I had not taken much interest in taxation. My interest was aroused by the debate, now over shadowed by more hair-raising events happening in our fair land, regarding OTT, which means Over The Top and SVS, which means services. All of that was OMH (Over My Head) until some Good Samaritan told me that it is simply about taxes on use of social media.

A tax by whatever name it is called is a duty, a fee, a rate or a toll etc. Direct or indirect, it is a mandatory financial charge upon a taxpayer by a governmental organisation.

The new taxes introduced on the above activities have generated more heat than illumination. Discussion has often degenerated into a shouting match among the commentators, experts and non- experts alike; those who are blindly in support of and those who are vehemently against the taxes.

Of course there is also the majority who are innocently clueless as to what is going on. That is not the way public discourse should be conducted.

It is time we went back to the basics: the principles and considerations upon which any tax should be based. However, for the purposes of clarity; a tax system may involve either imposing a charge or removing it. Whether a tax is being imposed or removed, it must be in pursuit of certain principles or objectives. To the few to whom this may sound obvious and elementary, I beg your indulgence. A tax which is not in pursuit of any of the following objectives is illogical and should be condemned as it is no different from robbery.

Historically, the raison d’être of the state was to provide security of person and property to its citizens against neighbouring states. With that narrow role of government, the primary and original objective of taxes and not necessarily in form of cash because that came later, was to provide sustenance for the defenders of the state, today called soldiers. With the expansion of the role of government in the affairs of its citizens, the primary objective of taxes is now to enable government provide services to its citizens. The commonest of these is provision of healthcare, education, and infrastructure.

That should be clearly understandable for the money to finance such activities has to come from somewhere. Today, apart from maintaining a standing army even when there is no war, taxes are also manipulated in case of going to war, offensive or defensive. In such a case, government will remove taxes on imported raw materials necessary to make weapons. In the same vein it may impose taxes on what is considered luxuries, like hair pieces for both women and men in order to raise money to pay for materials to make armaments.

Taxes may be imposed in order to prevent or discourage behavior deemed harmful to the population both at individual and collective levels; i.e. use of tobacco, excessive drinking of alcohol and importation of old vehicles and machinery. This type of tax can have multiple advantages; it reduces avoidable health and hazardous to the individual and community, reduces accidents, reduces expenditure on treatment of those afflicted while at the same time raising revenue to spend on worthy causes.

A taxation regime is a coin with two sides: on one side is imposition and the other exemption. There are occasions to seek revenue and there is a time to forego it. Taxation is one of the tools of social engineering which the government uses to influence social behavior of its citizens. From what items to seek revenue (to tax) and from which to forego revenue (to exempt) is determined by the priorities which are a reflection of the values of the government. In much the same way is government expenditure a reflection of its priorities. In summary taxes may be imposed or removed with some of these objectives in mind:

i) To raise revenue for social services

ii) Reduce health hazards

iii) Enhance health

iv) Security

v) Induce people to work in case of poll tax (which was removed);

vi) Redistribution income e.g. estate duty in the more sophisticated economies.

The government is duty- bound to honestly explain to Ugandans in which slot OTT and SVS taxes on mobile money transfer fall before they are forced to ascribe their own intentions.

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Joseph Bossa is a leader of the opposition Uganda Peoples Congress party