ICTAU: OTT and mobile money taxes threat to FinTechs, bridging digital gap
The ICT Association of Uganda or ICTAU has warned that the taxes which were recently introduced, affecting social media users and mobile money transaction “will undoubtedly” constrain the development of the country’s industrial and economic sectors.
The taxes came into effect on July 1, and ictau says their impact on the economy will arise from lack of sufficient deliberation or consultation by the government and rigorous research before enacting these taxes.
“The flat tax on social media and other common internet services will disproportionately affect the large number of Ugandans who live in poverty, further widening the digital divide, while limiting the public’s ability to access information, communicate and express themselves,” reads in part a statement issued by Albert Mucunguzi, the chairman, ictau.
“The new taxes on Mobile Money transactions will make these financial services less accessible to already underserved and vulnerable populations.”
Mucunguzi argues that these taxes will increase the cost of doing business in Uganda, and the lack of a predictable policy development process threatens to make Uganda a less attractive destination for investment.
He also says that additional charges added to Mobile Money, in particular, threaten the survival of innovative companies in the digital payments space (commonly referred to as fintech), making it more difficult for innovators to create new solutions within that ecosystem.
“Companies and individuals engaged in e-commerce and digital communication or otherwise conduct business, job searches, etc. through social media may be negatively affected by a reduced local online audience,” says Mucunguzi.
“The increased cost of using Mobile Money services will encourage people to revert to cash and the informal economy. This increases risk and decreases the ability of Government, businesses and individuals to monitor and account for economic activity.”
According to ictau, since “Many members of the public are still ignorant about these taxes due to the lack of consultation and sensitization” it may endanger the reputations and safety of Mobile Money agents who could be perceived as thieves and liars when trying to implement the new charges.
Basing on the above, ictau says, its members have resolved to support domestic and international efforts to repeal these taxes, including the legal petition launched by the Cyber Law Initiative.
The association has further urged the Government to ensure that all future laws and regulations related to Uganda’s ICT industry originate from a predictable, deliberate process that incorporates evidence-based research and public consultation.
Additionally, the association says it is engaging the Ministry of ICT and National Guidance together with its agencies UCC and NITA-U in order to push for a sectoral dialogue on this issue and await their response.
“We envision an ICT sector in Uganda that nurtures local innovation and welcomes investment, and therefore we encourage the Government of Uganda to engage more productively with its citizens to make this right,” ends the statement.