The government is proposing the abolition of Over the Top Services (OTT) under the Excise Duty (Amendment) Bill, 2021.
The Bill was tabled Thursday by minister of Finance Matia Kasaija and proposes the re-introduction of excise duty at a rate of 12 per cent on internet data.
According to audit firm, PricewaterhouseCoopers, the Bill proposes exclusion for data used for the provision of medical and education services.
OTT or social media tax was first introduced in 2018 and caused a nationwide uproar and protests led by the outgoing Kyadondo East MP and former presidential candidate Robert Kyagulanyi.
A section of the public then demanded a reconsideration of the Excise Duty (Amendment) Act, 2018 with a view of removing the Shs 200 OTT tax that came into effect on July 1, 2018.
The new proposal by the government to repeal the Shs 200 tax follows last year’s revelation to parliament’s finance committee about plans to drop OTT and instead impose a direct tax on mobile data.
The revelation was made by the then Uganda Revenue Authority (URA) commissioner general Doris Akol who underscored the need to have the tax policy reviewed since it was not performing well.
“Proposing to amend Schedule Two of the Excise Duty Act to look at possibly putting excise duty on data…this would counteract the effects of OTT and make it a bit more efficient to collect tax on data instead of the OTT which is highly evaded and is not performing well,” Akol said then.
In July 2019, URA reported a collection of only Shs 49.5 billion out of the targeted Shs 284 billion from OTT.
This meant that URA was unable to collect Shs 234 billion from this tax measure, a shortfall of 83 per cent from the estimates.
According to the URA, many Ugandans resorted to using Virtual Private Networks (VPN) and wireless networks in their offices to avoid paying the tax.
For OTT, every Ugandan using social media platforms like Facebook, and WhatsApp was expected to pay Shs 200 daily.