The Parliament on Thursday came to an agreement to drop the tax on Over-the-Top services (OTT), approving the 12 percent tax on mobile data. Internet bundles used for medical and education services will be exempted —in other words, won’t be charge the 12 percent levy.
With the tax approved, this could see an increase in the cost of mobile data. However, in 2019 Hon. Frank Tumwebaze who by then was the Minister of ICT and National Guidance, said, “With or Without OTT tax, the cost of mobile data will remain high.” Stating that removing the levy on OTT services alone won’t influence data prices.
The levy on mobile data is one of the seven taxes of the Excise Duty (Amendment) bill 2021 that the Members of Parliament agreed to be put in place and will come into effect of July 1st, 2021 —when the next financial year starts. However, the government has not indicated or proposed on how it intends to collect the levy on internet data.
The new proposal by the government to revoke the widely-opposed UGX200 tax follows last year’s revelation to Parliament’s Finance Committee about plans to drop the levy on OTT and instead impose a direct tax on mobile data. The revelation was made by Ms. Doris Akol who by then was the Commissioner General of the Uganda Revenue Authority (URA). She 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 mobile 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,” Ms. Akol said then.
To repeal the tax which has been regarded as the worst performing tax by URA, comes months after a Market Performance Report that was issued by the Uganda Communications Commission (UCC) indicating that the number of internet subscribers who are not paying the OTT tax was at least 7.6 million of the target 18.9 million subscribers. Collections from the tax introduced in 2018 has been below as users avoided it by using Virtual Private Networks (VPNs) or Wi-Fi connections.