The World Bank urges Uganda to remove OTT tax to increase access to coronavirus prevention messages.
World Bank tells Uganda to remove OTT tax.
The World Bank has urged the government of Uganda to consider removing the over-the-top tax (OTT), citing that the move will increase access to coronavirus prevention messages for vulnerable people.
According to the World Bank’s updated 2020 Economic Report, the tax in Uganda has not achieved its purpose because many could easily invade and avoid paying it.
Furthermore, the World Bank points out that this tax has drastically reduced the number of Internet users, widening digital and income inequalities, and thus needs to be re-evaluated.
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In 2018, the government imposed a daily tax of 200 shillings on social media use. The tax was expected to raise at least 284 billion shillings in fiscal 2018/19.
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The government was only able to collect 49.5 billion shillings, while the majority of the Ugandan population adjusted to using other means, including the use of virtual private networks (VPNs) to avoid taxes, while others avoided using social media to purchase the service.
Now that Uganda is fighting the coronavirus epidemic, the government recently announced that campaigns and rallies for the upcoming 2021 elections will be conducted scientifically using digital platforms.
This justifies why the social media tax should be reduced so that more voters can get information from their preferred candidates, according to the World Bank.
“The availability of digital services such as online shopping, food distribution, social media, instant messaging and online entertainment allows people who are lonely to stay together at home and function socially and economically,” says the World Bank.
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“The removal of the social media tax will contribute positively to the response of the COVID-19 crisis and encourage the use of the Internet and digital technology in Uganda,” it added.
In comparison, the bank says governments can promote affordable prices by eliminating taxes and taxes used on specific digital sites and services, thereby reducing transaction costs and supporting telecommunications companies in reducing the cost of services required during the crisis.
“Governments can promote affordable prices by eliminating taxes and taxes used on specific digital sites and services, thereby reducing telecommunications costs and supporting telecommunications companies in reducing the cost of services required in times of crisis. In the long run, this is likely to expand the base.”
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Although the 10 per cent excise duty on mobile money transaction fees introduced in the 2013/14 budget should be deducted from the tax, the bank explains that mobile money services will still contribute to the tax base.
The World Bank estimates that this will generate an average of 6 per cent of total excise tax revenue. 18% value-added tax is also used on mobile money transaction fees.
