NGOs ask government to revise internet tax

Civil society organizations under their umbrella body of the East African Budget Network have asked the government of Uganda to review taxes on the internet and smartphones ahead of the financial year 2023/24, which starts on July 1.

Julius Kapwepwe, the coordinator of the East African Budget Network – a non-governmental organization that represents several civil society organizations in East Africa, criticized the high cost of accessing the internet in Uganda. Kapwepwe noted that a possible tax increase on internet usage in Uganda would affect the already narrow internet penetration in the country, which stands at 52 per cent as of 2022 data.

This, he said, would also delay the attainment of Uganda’s Digital Vision 2040. Uganda’s Digital Vision 2040 seeks to empower and encourage citizens to adopt mature and emerging technologies to achieve the goals of universal inclusion, sustainable development, economic progress and poverty eradication through digital innovation.

“Taxes on the internet and smartphones translate into rolling back financial deepening, agency banking prospects and access to information and other services. Surely as Uganda, we can avoid the temptation of rolling back the hitherto impressive digitization the National Resistance Movement government gains,” said the East African Budget Network coordinator, Julius Kapwepwe.

Kapwepwe noted that since the internet is a key enabler and amplifier of business, communication and e-government services in the 21st century, Uganda shouldn’t be motivated to stifle its growth through taxation.

He added, “In the new financial year, Uganda’s tax regime must speak towards the removal of tax on the internet, mobile services and large data consumption. This will create a favourable competitive investment climate which shall support economic development in the country”.

In 2021, the government of Uganda suspended the infamous over-the- top tax, which, since 2018, was levied against the use of social media platforms like Facebook, WhatsApp, Twitter, etc.

When the tax was still functional, Ugandans paid Shs 200 daily to access these platforms. Instead of raising revenues as had been anticipated, the tax constrained internet usage in the country. Ugandans had resorted to using virtual private networks to avoid paying the tax.

Although the dropping of the OTT tax was welcomed, the government of Uganda introduced a 12 per cent tax on the internet; maintained a cocktail of taxes on the importation of mobile phone devices like 18 per cent on value-added tax and 10 per cent import duty on mobile phones like smartphones which, according to the East African Community Common External Tariff, are exempted from paying import duty.

Jane Nalunga, the executive director of SEATINI, a non-governmental organization (NGO), working on trade, fiscal and development-related issues for the realization of sustainable development and improved livelihoods in Uganda, said it is time for the government to repeal the tax on the internet as well as reduce or rescind tax on internet- enabled devices such as smartphones to hasten the realization of a digital economy.

“Government’s move towards a certain direction should be in tandem with the taxes so that the objective is achieved. Government should rescind these taxes to increase internet access, availability and affordability to customers. It needs to reduce taxes on smartphones as well as consider scrapping off internet tax. Scraping off certain taxes should not be seen as a loss of revenue. It facilitates the achievement of specific objectives that would at some point enable the government to collect more revenues owed to vibrant economic activities that ride on the internet services such as e-commerce. If more people can access smartphones and use them to boost communication and access information, boost productivity and make markets more efficient, the government can be able to recoup those taxes via numerous taxes such as VAT,” Nalunga explained.

According to the UNESCO Broadband Commission for Sustainable Development’s Working Group on Smartphone Access, high smartphone costs as a result of taxes have been identified as the major reason for the slow smartphone adoption in Uganda.

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