The World Bank has asked the Ugandan government to remove the controversial OTT tax which was implemented in the country 2 years ago. According to the institution, removing OTT would enable many Ugandans to access coronavirus updates.
In its Uganda economic update 2020 REPORT, the World Bank says the tax has not achieved its intended objective because “the tax is difficult to collect and easy to bypass by more technically-savvy users”
The bank also notes that the social media tax is rather reducing “the proportion of internet users and widening digital and income inequality and should be re-evaluated”.
Only 49billion in tax has been collected by the government as some people are able to evade the tax. Some people who could not use a VPN simply avoided social media platforms.
“Removing the social media tax would contribute positively to the COVID-19 crisis response and encourage the use of the internet and digital technology in Uganda,” the World Bank says.
The World Bank further stated: “The availability of digital services such as online shopping, food delivery, social media, instant messaging and online entertainment allows people in self-isolation to remain connected and socially and economically active while at home.”
It added that “governments can promote affordability by removing taxes and levies applied to specific digital platforms and services thereby reducing transaction costs and supporting telecommunications companies in lowering prices for services that are needed during the crisis. In the long run, this is also likely to broaden the tax base.”
The World Bank sees the Ugandan OTT tax as a block to digital freedom and growth
Sincerely speaking, the OTT tax has proved to be more of a problem than a beneficial solution to Ugandans not forgetting the various reports that have come out stating it has been used as a form of censorship and also certain parties have misused the resources collected from the tax for their own personal gains.
If the country is to see itself grow into an economy where digital freedom is respected and is also used to better the lives of citizens by allowing them access to opportunities through the use of the internet, then we could see a future where young startups and businesses alike can benefit.
Early in January this year, Uganda Revenue Authority (URA) Commissioner General Doris Akol called for the amendment, and in other cases abolition of several tax laws, including the OTT (Over-the-top media service), given its rate of evasion and non-performance.
In July 2019, the tax body reported a collection of only Shillings 49.5 billion out of the targeted 284 billion from OTT. This meant that URA was unable to collect 234 billion from this tax measure, a shortfall of 83 percent from the estimates.
According to the URA, many Ugandans resorted to using Virtual Private Networks (VPN) and wireless networks in their offices to avoid paying the tax. For OTT, every Ugandan using social media platforms like Facebook, and WhatsApp was expected to pay 200 Shillings daily.
We totally agree with the World Bank, and URA also noted how the tax has failed to meet its objectives. The government should either rethink its steps towards the tax or scrap it off until better options are presented onto the table.
Also read: Uganda’s MPs Say Yes to Social Media Tax
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Author: Moses Echodu
Moses is an avid Sports and Tech enthusiast. He loves to keep up to date with all the latest information and research on some of the most compelling stories.