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UCC’s Mutabazi: Discussions to tax Facebook directly underway

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The writer Godfrey Mutabazi (featured image) is the executive director of Uganda Communications Commission. Courtesy image

By Godfrey Mutabazi

I had an interesting interview with the BBC East Africa Bureau on concerns around the Taxing of Social Media, which I would like to repeat here.

One of the concerns is on the figures reported by the Uganda Communications Commission of internet users that appear to be very high in spite of the introduction of the OTT Tax as it has come to be known.

The figures used in the reports published by the Commission are aggregated quarterly from the data reported by licensed Mobile Network Operators of active internet Subscriptions. Operators have a license requirement to make monthly operational reporting to the Commission.

However, essential to note is that these figures include all internet access subscriptions both for mobile internet subscribers and fixed internet subscribers. These figures consist of both social media access and access to other areas of the world wide web.

It is important to remember here that the OTT Tax is only on the Over The Top services and not the internet in general. Therefore, the levy, having not been applied to every aspect of internet access, allowed for subscribers to continue using the internet generally even without paying the Social Media Tax.

However, from the operator monthly reports collaborated by the URA collections, there was a reported decline of users of social media services in the quarter July – September 2018 immediately following the implementation of the Social Media Tax.

The decrease was of users who were previously active Social Media users, but following the implementation of the tax, they were not reported to have paid the daily, weekly or monthly tax to access Social Media.

That said, there have been alternative means by which subscribers access Social Media primarily through VPN or shared Wi-Fi platforms.

These subscribers would ordinarily be reported under the total internet users which therefore remained high but not published under the social media subscription figures due to them being able to bypass the expected route for social media access.

An important consideration that we should all remember is that the telecommunications sector is a significant tax contributor to the economy, and these taxes are charged at varying levels based on the type of telecommunication service offered in the market.

As a result, traditional voice service was a significant contributor in taxes both at a local and international traffic scale but with the convergence of technology and services were voice is moving from traditional Public Switched Telephone Network (PSTN), or the traditional circuit-switched telephone network to Internet Protocol (IP) networks, the emergence of OTTs have affected government targeted tax collections with a reported decline from telecom services over the years.

All countries in the world are struggling with the decline in the contribution by telecom operators to the government coffers based on the convergence of services. So this is not unique to Uganda. Moreover, more so because this contribution is moving offshore to the platforms where OTT providers, like WhatsApp, Facebook and the like reside.

As other countries continue to analyze, Uganda made the move to introduce the tax so as to ensure that the government can recover part of the telecom contributions that have been affected by the convergence of technology in light of the country’s inability to charge WhatsApp and Facebook directly a portion of the revenue generated from Ugandan subscribers.

That aside, countries around the world are in discussion to establish means by which these OTT providers can be charged legally a portion of the revenue generated as a result of the use of their platforms by local citizens to recover the loss of government taxation.

Therefore, the OTT Tax is undoubtedly not political and has nothing to do with freedoms of speech. I believe that Ugandans should be more concerned that the wealthiest and most productive international companies which happen to be OTT platforms, e.g. Facebook, WhatsApp, Instagram, etc., have eroded Uganda’s taxation potential for communication services. This is a significant reality that is being discussed world over.

We should also remember that these organizations, do not make any contributions to the government of Uganda in the form of taxes, and yet have leveraged off their subscription numbers, which include our local citizen figures, to generate their substantial revenues.

In the absence of international treaties that support the taxing of global companies that deliver services off global IP platforms, the government surely needed to address the tax collection gap hence the reason to introduce the OTT Tax.

Further discussions are being held locally, regionally and internationally to agree on how to address contributions to the government by these companies so as not to appear to penalize citizens in settlement of this levy.

Discussion between the government and Mobile Network Operators have encouraged the promotion of policy friendly telecommunication services.

Indeed, we are seeing a response where operators are introducing Social Media Bundles that come with the OTT Tax inbuilt without excessive price increases. I hope we shall have an opportunity tomorrow while meeting the Chief Executives of the Telecom companies at the inaugural Annual Telco Forum to discuss some of these issues as we strive to drive the development of a robust communications sector in Uganda.

This post originally appeared on the website of UCC Under the title Godfrey Mutabazi on OTT tax

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