The World Bank has urged the Ugandan government to consider removing OTT tax to boost access to coronavirus prevention messages.
The World Bank has urged the Ugandan government to consider removing the over-the-top tax (OTT) highlighting that the move could boost access to coronavirus prevention messages for the vulnerable groups of people.
According to the World Bank’s 2020 updated economic report, the tax has not achieved its intended objective in Uganda because many people can easily invade and avoid paying it.
Also, the World Bank pinpoints that the tax has tremendously reduced the number of internet users, widening digital and income inequality and thus should be re-evaluated.
The government in 2018, imposed a 200 shillings daily tax on using social media. The tax was expected to raise at least 284 billion shillings in 2018/19 financial year.
The government was only able to collect 49.5 billion shillings of that with majority Ugandans adjusting to applying other means including using Virtual Private Networks (VPN) to bypass the tax while others more so those who could not afford the service simply avoided using social media.
And now with Uganda still battling to fight the coronavirus pandemic, the government recently announced that campaigns and rallies for the coming 2021 elections will be done scientifically using digital platforms.
This according to the World Bank justifies why the social media tax should be scrapped to enable more and more voters to get access to information from their preferable candidates.
“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,” World Bank says.
“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,” it adds.
Relatively, the Bank says that governments can also 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.
“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 Bank explains that even if the taxes were to be removed, mobile money services would still contribute to the tax base through the 10 per cent excise duty on mobile money transaction fees introduced in the 2013/14 budget year.
This would generate on average 6 per cent of total excise duty revenues, the World Bank says. There is also 18% Value Added Tax applied to mobile money transaction fees.