This is the fourth in our series of articles looking at some of the topics to be discussed at our November 2018 conference, Beyond Borders: International Taxation into 2020. More specifically, one of the keynote speeches will look at the many tax risks companies face when operating in the developing world. Book your early bird ticket HERE before it’s too late!
In a controversial move, Uganda’s President Yoweri Museveni pushed through a social media tax that came into effect on July 1, sparking plenty of outrage from the country’s 2.6 million active social media users.
The tax will affect an array of social media channels including Facebook, WhatsApp, LinkedIn, Instagram, Viber, Google Hangouts and Skype, to name a few.
Social media users in the African nation had a rude awakening the morning of July 1, as their access to their favorite social media outlets appeared to be frozen.
On Facebook, Dan Mugeni, an avid social media user, wrote: “When I woke up, I was surprised that I had not received any messages on my Whatsapp or messenger. I could not login to my Twitter account either. This was strange given the fact that I had just bought 10 GB of data two days ago. I was about to call my telecom service provider then I remembered it is July 1, 2018, the day when government said it would implement social media tax on orders of our President.”
Mugeni was only able to access his social media accounts once he paid the Shs200 (0.045 Euros) tax for the day.
According to the country’s telecommunications companies, the tax can be paid via mobile money and either on a daily, weekly or monthly basis. The total tax for the month would amount to Shs6000 or 1.3 Euros.
Additionally, Uganda’s Daily Monitor reports, a 0.5 percent tax will be applied to any individual who “deposits, receives, pays and withdraws the money using mobile money,” a charge that will also affect the mobile payment of electricity bills, school fees, television and other similar services.
A Social Media Tax to Drive Productivity?
Besides raising millions of shillings for the state’s coffers, Uganda’s social media tax was supposedly designed to boost productivity and drive people away from gossip and idle talk.
Following initial criticism to the law, President Museveni, ironically enough, took to social media—which he referred to as a “luxury by those who are enjoying themselves or those who are malicious”—to explain his rationale behind the new tax.
In a statement publicized via his Twitter account, Museveni wrote: “As to social- media tax, all the moral reasons are in favour of that tax. The social - media users have no right to squander the dollars I earn from my coffee, my milk etc by endlessly donating money to foreign telephone Companies through chatting or even lying and, then, they are allergic to even a modest contribution to their country whose collective wealth they are misusing.”
Museveni’s government had in the past attacked the use of social media in the country.
During the 2016 presidential elections, for example, the government blocked access to Facebook and Twitter under the pretense of safeguarding the country from unnamed threats.
Museveni, of course, won that election in what was a tight race tainted by corruption and fraud allegations.
Opposition to Uganda’s Social Media Tax Grows
Obviously, Uganda’s social media users have lashed out at the government’s newest tax.
Several members of civil society, including the Cyber Law Initiative, have sued the Museveni administration and are looking for the country’s highest court to repeal the social media tax.
According to Chimp Reports, the lawsuit says “it was wrong for Parliament to make an amendment in section 3(b) and 6(e) of the Excise duty act 2018 without having public consultation which contravenes Article 29,43,79,8A (1) and 20 of the 1995 constitution.”
Furthermore, “the introduction of that tax contravenes and is inconsistent with national interests and common good of online promotion of accountability in running of public affair under Article 8(A) and national objectives and directive principles of State Policy xxvi of the 1995 constitution.”
Many other activists have argued that the government implemented this tax as a way of stifling the opposition and political mobilization throughout the region.
Nicholas Opiyo, a lawyer and political organizer, said back in May that the tax “is a new tool of stifling free expression and citizen organising that has been beyond the control of the state.”
“It’s intended to curtail the ever increasing central role of social media in political organising,” Opiyo added.
Amnesty International’s Joan Nyanyuki agreed, sating that the tax is “a clear attempt to undermine the right to freedom of expression” in Uganda.
“By making people pay for using these platforms, this tax will render these avenues of communication inaccessible for low income earners, robbing many people of their right to freedom of expression, with a chilling effect on other human rights,” she added.
Another factor that has irked the country’s social media users is the added cost for a service that is already expensive by global standards.
Diana Taremwa, a charity worker in Kampala, said, “Data right now is essential in nearly every worker’s day to day business, a responsible government should be lowering its price not the opposite.”
Overall, Quartz’s Africa Editor Yinka Adegoke writes that the social media tax “is being resisted for many reasons including arguments for freedom of expression, net neutrality, and affordable connectivity. Other arguments are against double and/or punitive taxation and taxing individual users in lieu of the social media companies that actually make money. Most obviously though, it is being resisted because it falls within a pattern of government clampdown on online expression.”
As a sign of resistance to this new tax, many social media users will resort to the use of Virtual Private Networks (VPN) to circumvent the tax.
According to a recent Uganda’s Daily Monitor poll of its readers, close to 70 percent admitted that they will be using a VPN to avoid paying the levy.
In your opinion, what are some of the main tax risks of operating in the developing world? Let us know in the comments section!