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To control speech, Uganda is taxing internet usage by 30%

A town official accompanying visiting journalists sends a text message on his phone in the slum of Kachuf in the Masaka district of southern Uganda March 24, 2009. The word 'Kachuf' in Luganda means 'dirt'. MALTA OUT. NO COMMERCIAL OR EDITORIAL SALES IN MALTA
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The new internet tax will hit Ugandans hard
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What started off as an effort by the authorities in Uganda to control the internet by imposing a tax on use of social media has transformed into a tax on data packages, generating more dissent and controversy.

As Uganda grapples with the economic and social effects of a lockdown brought on by the worsening Covid-19 crisis in the country, people will have one more added expense to worry about: tax on internet bundles. Effective July 1 internet users will pay a 12% tax on data packages, bringing total tax on internet use to 30% after factoring in the existing 18% Value Added Tax (VAT.)

The new tax, passed by the country’s parliament in May, replaces the over-the-top tax (OTT), popularly known as social media tax, that users massively avoided using virtual private networks (VPNs.)

Since 2018, internet users have been required to pay a daily tax of 200 shillings ($0.055) to use any one of more than 50 mobile communication apps covered under the OTT tax including social media apps such as Facebook, Twitter, and instant messaging and voice communication apps like WhatsApp.

For those living below the poverty line, this is ~2% of their daily income.  The OTT tax was pitched by president Yoweri Museveni as a way to curb “widespread rumor mongering” on social media and to raise revenue.

OTT was perhaps a signal that the undiscerning missed as the country’s leadership slowly faded to the dark side.

The removal of the social media tax was celebrated by many including activists, politicians and users on social media, while the motive and rationale of its successor has been questioned and derided by many.

“The tax [OTT] was the most surprising for a country and citizenry that had always touted their liberal economy and relatively free media space. OTT was perhaps a signal that the undiscerning missed as the country’s leadership slowly faded to the dark side,” says Daniel Bwambale, a Kampala-based lawyer and commentator.

Since the introduction of the OTT tax, the number of internet users in the country had decreased by 30% with more than 3 million dropping off in the first three months of implementation according to Uganda Communication Commission (UCC.)

It remains to be seen what effect the new tax will have on the number of internet users in Uganda when compared to the social media tax. Additionally, VPNs might still be required as Facebook, one of the more popular platforms in the country—after whatsapp—remains blocked and can only be accessed via VPN.

“It is hard to understand why the tax wasn’t scrapped earlier. It only hit 17% of expected revenue despite allegedly 12 million people paying it. It meant that the 12 million were using the internet only when they should,” Bwambale says.

Uganda’s two leading telecoms, MTN Uganda and Airtel Uganda, are yet to announce changes in the tariffs to reflect the tax but other service providers such as Roke Telkom have already enacted price changes. Roke Telkom’s cheapest monthly data package has in the few days since the announcement increased by 11% while its most expensive package has increased by 12%.

Covid-19 lockdown makes the impact of Uganda’s social media tax higher

The tax is even more impactful than it would be under normal circumstances because Uganda is under lockdown. Many businesses moved online to reach customers, others are conducting meetings via platforms such as Zoom, while students who have lost over a year of learning are taking classes online.

Bwambale does not expect the major telecoms to immediately increase prices, especially in a depressed economy. He expects the telecoms to slowly ease in a few tweaks, to lower their data offers, while maintaining the price.

Uganda’s government, which has been on a borrowing spree from international lenders, argues that the new tax is one of the many measures to raise more revenue, service debt, and deliver services to the people. Recent history including internet shutdowns and clampdowns on users suggests otherwise.

“The most immediate [impact], is that Uganda, can now have accurate Google Analytics data to tell us how many people use the internet,” Bwambale says.

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