What To Do About Uganda’s Social Media and Mobile Money Taxes?

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In July 2018, the Ugandan government instituted a 200 shilling, or about $0.05 per day excise duty on Over-the-Top (OTT) social media and instant messaging services including Facebook, WhatsApp, Twitter, LinkedIn, Instagram, Skype, Google Hangouts, Tinder, and Viber, and a 1% tariff on all mobile money transactions. Mail services such as Gmail are not considered a taxable OTT service.
President Yoweri Museveni said that social media encourages gossip, and the social media tax is intended to reduce borrowing from outside the country and improve the low GDP tax ratio. Regardless of why he pushed the Ugandan Parliament to pass the tax, the impact is very real.
Social Media Tax Impact
In the Pollicy report Offline and Out of Pocket, around 1,000 people with smartphones in Kampala, Jinja, Gulu and Bushenyi, were surveyed in focus group discussions and in-person interviews to better understand the impact of the tax on internet usage. Key results from the survey included:

  • Affordability​: Paying the social media tax for one-month is greater than 6% of respondents total monthly expenditures, especially the 25% of respondents who made less than US$27 per month.
  • Access​: Mobile internet, where the tax was applied, was the only means to access the Internet for 97.4% of respondents. Only 0.7% had access to a computer and only 0.2% used internet cafes,.
  • Payment: Around 56% of respondents pay social media taxes, whereas 38% use a VPN to access “over-the-top” services for free.
  • Usage​: Prior to the tax, 33% of respondents would access social media platforms more than 10 times a day, yet only 6.6% kept up this pace of usage after the tax started.
  • Productivity​: One-third of respondents used social media for business activities and of these respondents, 74% reported reduced income following the tax implementation.

Government figures show that the social media tax is having a major impact on Internet access. Internet subscribers dropped by 3 million or 18.75% after the tax was introduced, from 16 million to 13.5 million.
Mobile Money Tax Impact
Of the Pollicy survey respondents, 97.6% had used mobile money services after the tax was introduced, for a myriad of expenses:

  • 56% for supporting household and school expenses
  • 23% for business transactions
  • 16% for airtime top-ups
  • 4.7% for paying the social media tax

A majority, 87%, said that the mobile money tax reduced their income and business growth, with 70% transacting less money than before the excise duty, and 4.2% of respondents completely stopped mobile money transactions.

Ms Elsa Muzzolini, the MTN mobile money General Manager backed up these findings by saying that MTN ​saw a 50% drop in mobile money transactions.
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What Should We Do About the Social Media Tax?
The large and disappointing drops in Internet and mobile money usage in Uganda after these excise taxes were introduced, brings to the fore a question we should be asking ourselves: What should we do about these taxes?
On the one hand, the taxes are an obvious barrier to ICT4D. If people are reducing their usage of Internet and mobile money services, we will be hard pressed to see advances in digital development – in any of our sectors.
On the other hand, Uganda is not alone in wanting to tax Internet companies somehow, especially since they are extracting money and data from Ugandans, with almost perfect impunity. In addition, reducing social media consumption, which is known to be mentally harmful, is a laudable goal.
Ether way, what can we do? What should we do? Or is this a purely Ugandan issue that we should leave well enough alone?
Ugandans, please tell us how we can help!

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