New tax on internet to trap VPN users – Gov’t

Kampala, Uganda | THE INDEPENDENT | The Ministry of Finance, Planning and Economic Development says one of the main reasons as to why the government introduced a 12 percent Excise duty on internet use was to trap Ugandans who were evading OTT by using Virtual Private Networks (VPN).

The Over the Top Tax of 200 Shillings a day was introduced in 2018 amid protests from the public and civil society, who argued that it was a violation of the right to information and would limit the growth of IT-based communication. The tax mainly targeted social media users who were accessing it through their mobile phones.

Three years later, the tax has been scrapped with the government realizing less than a fifth of the anticipated 248 billion Shillings in the first year of implementation. The matter was worsened by the switching off of internet for social media use during the general elections in January, as more Ugandans opted for VPNs.

Many have since continued with it especially since it is the only way they can access the most popular social site, Facebook, which remained blocked by the government to date.

The Director of Economic Affairs at the Ministry of Finance, Planning and Economic Development, Moses Kaggwa says while this is expected to reduce on the tax administration challenges and increase revenues, it will plug the revenue gap left by the VPN users.

Kaggwa also gave justification that the new tax and the removal of OTT followed public complaints that it was stifling communication, and therefore, the ministry thought the excise duty would make it easier for the internet users. But he also says OTT was unfair because users like students were suffering more than others, adding that the new measure will not hurt particular groups.

This was during an engagement between the government and private sector players who expressed concern about the new measures and their effects on the economic activities and livelihoods of Ugandans. Former Agriculture Minister, Victoria Sekitoleko expressed concern at the rate government is changing policies, hardly giving any change for them to bear fruit and be evaluated before changing.

But she also reminded the government to first give back what it owes the private sector so that to revive economic activity. The private sector demands more than 4 trillion Shillings for supplies and services made to the government over years. Sekitoleko is also worried about the failure of the government to fight corruption.

There are growing calls on the government to improve the relationship between the tax sector and the public so that Ugandans can find paying taxes more attractive. This would also increase compliance, reduce the cost of administration and enforcement and in the end lead to higher tax revenues.

The Assistant Commissioner for domestic taxes department, James Odongo said the tax body has improved its tax education drives but will continue introducing more outreach programs to reach more people.

The URA Commissioner Legal Services, Patience Tumusiime admitted that corruption persists but cited tax agents as the main culprits. She says however that measures including stricter screenings have been employed and next year, they hope the problem will be reduced.

*****

URN