Following a brief tweet stating that ‘social media encourages gossip’ by President Yoweri Museveni of Uganda, a new tax was introduced by the Ugandan Parliament on July 1st, 2018 requiring an excise duty on over-the-top services over the internet. The tax was intended “to reduce borrowing from outside the country and improve the low GDP: tax ratio.”

The new Social Media tax requires users to pay a tax of UGX200(US$0.05) per day to access over-the-top (OTT) services. These services include  Facebook, Whatsapp, Twitter, LinkedIn, Instagram, Skype, Google Hangouts, and Tinder. Mail services such as Gmail are however exempted from the tax. Major internet service providers (ISPs) in Uganda have blocked access to these platforms and a user must first pay their social media tax, on a daily, weekly, monthly, quarterly or annual basis), to access these OTT services. Payments are made using Mobile Money and access would previously expire at midnight, but now lasts a 24-hour period from the time of payment. Furthermore, a 1% excise duty is charged on the mobile money transaction required to pay the OTT tax resulting in a total payment of UGX202.

The report on research done by  Pollicy shows that many Ugandans opposed the new taxation and resorted to using circumvention tools such as virtual private networks (VPNs), but telecommunication operators have threatened to block access to these VPNs. The Executive Director of Uganda Communications Commission (UCC), Mr Godfrey Mutabazi commented on this circumvention stating that they already had systems in place to block VPNs, and were waiting for the directive from the government.

The report has also shown that most Ugandans access the internet through their mobile phones. On affordability of the tax, the Alliance for Affordable Internet showed how the cost to access just 1GB of data for Uganda’s poorest account for nearly 40% of their average monthly income. Paying the social media tax alone for one month amounts to UGX6000, which is already more than 6% of their monthly income.

 When it comes to payment, around 56% of who participated in the survey say that “they pay their Social Media taxes”. Interestingly, 38% of respondents continue to use a VPN while 3.7% use open WiFi. Most respondents (58%) pay their social media tax on a daily basis, with 25% paying weekly and only 16% paying on a monthly basis.

Students have claimed that the tax affected their education as it’s a requirement. “ Our instructions at school are sent through Whatsapp. It’s the easiest way of communication to groups of students, so we must pay to access it. Using, of course, all ways, even paying when there are no options.”

In terms of usage, the report quotes that prior to the implementation of the social media tax, 33% of respondents would access social media platforms more than 10 times a day, but this number dropped down to just 6.6% after the taxation. While previously only 5% accessed social media platforms “a few times a week”, this number rose to 29% after the taxation.

One-third of respondents used social media for business activities and of these respondents, 74% reported reduced income following the tax implementation, while 20% reported that their income remained the same.30% of respondents were strongly against the social media tax, while 51% were not in favour.  Most disagree that social media tax will reduce debt, rumours, gossip and conspiracy theories. In general, most respondents found the tax frustrating (38%). They felt a limitation in communication and information (33%) and increased expenses (18%). Few people vented their frustrations in having to use mobile money to pay the social media tax.

 Persons with disabilities (6.3% of respondents) are a particularly marginalized population in relation to the tax. Recently, Uganda National Association of the Deaf  (UNAD) Executive Director Joseph Mbulamwana commented “Most of the deaf people are really poor. Before introducing OTT tax, we were communicating well but with the new taxes, our phones are off. We want to communicate but we cannot. It is like the government is closing our mouth and does not want us to communicate”, insisting that the government should subsidize the tax.

Taxation of Internet-based services has been on the rise across Africa in recent months. In neighbouring Tanzania, bloggers must be vetted by the government and are charged an annual fee of $930 before producing any online content. In Zambia, the government plans to roll out a tax on internet calls at a cost of ZMK0.3 (US$0.03) per day. In Kenya, recent legislation has led to the introduction of new price changes that have increased the cost of internet access through a 50% excise tax hike passed on to customers. In Benin, a proposal to charge CFA Francs 5 ($0.008) per megabyte of OTT services as well as a 5% fee on OTT services was struck down after a peaceful protest campaign #TaxePasMesMo (“Don’t Tax my Megabytes). Similarly, in Uganda, #ThisTaxMustGo became a rallying cry against the social media tax.

The effects of the new tax were felt almost immediately. A month after the Mobile Money tax was introduced, MTN mobile network reported a drop by 50% in mobile money transactions. Ms Elsa Muzzolini, the MTN mobile money General Manager stated, “revenue to government has slowed down from 50 per cent to 30 per cent because of reduced earnings since most people have abandoned mobile money”. A majority, 87%, indicated that the mobile money tax has resulted in reduced income and business growth, and in turn, 97% feel that the mobile money tax should be completely scrapped.

The report strongly points out that Ugandans are struggling to make the payments on the tax which have resulted in a reduction in access and usage, as well as negative impacts on economic growth, income and savings. It further states that there had been a reduction in communication and other sectors such as education and business are, in turn, affected. Furthermore, the negative impacts on minority groups such as those with disabilities, and in areas of education, access to information, and communication could far outweigh any revenue-related benefits.

“At a time when the world scrambles for data and information, restricting access can have far-reaching consequences for Uganda,” the Report says.

Download the report, here.

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