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Government Asked to Scrap Off OTT Tax

The World Bank says removing levy on social media could boost access to coronavirus prevention messages for the vulnerable populations.

The government of Uganda has been asked by The World Bank to scarp off levy imposed on social media. This was revealed in the 15th Uganda Economic Update 2020 report — arguing that the move could boost access to coronavirus prevention messages for the vulnerable populations. Also adds that the levy is reducing “the proportion of internet users and widening digital and income inequality and should be re-evaluated”.

The International Financial Institution in the report said the tax has not achieved its intended objective because “the tax is difficult to collect and easy to bypass by more technically-savvy users”

The tax was inaugurated in the 2018/2019 financial year — passed by the Parliament of Uganda. The Excise Duty (Amendment) Act 2018—imposed a UGX200 charge on Over-the-Top services per day of access. Consumers can also choose to pay UGX1,400 weekly, UGX6,000 monthly, UGX18,000 Quarterly or UGX73,000 Annually.

The tax was expected to raise at least UGX284 billion in that financial year but only collected UGX49.5 billion. URA former Commissioner General; Ms. Doris Akol attributed the shortfall to use of Virtual Private Networks (VPN) and wireless (Wi-Fi) connections

“Removing the social media tax would contribute positively to the COVID-19 crisis response and encourage the use of the internet and digital technology in Uganda,” says The World Bank.

“The availability of digital services such as online shopping, food delivery, social media, instant messaging and online entertainment allows people in self-isolation to remain connected and socially and economically active while at home.”

It added that “governments can promote affordability by removing taxes and levies applied to specific digital platforms and services thereby reducing transaction costs and supporting telecommunications companies in lowering prices for services that are needed during the crisis. In the long run, this is also likely to broaden the tax base.”

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