The long awaited threat by Government to impose tax on digital companies may soon be realised, following a proposal by the Ministry of Finance to impose a 5% tax on all digital companies deriving income from Uganda.
This followed the tabling of the seven tax bills, in particular The Income Tax Amendment Bill 2023 by Amos Lugoloobi, Minister of State for Planning in which Government is proposing to insert a new clause in section 86A of principal Act and impose a tax on non-residents providing digital services.
The proposal reads, “A tax is imposed on every non-resident person deriving income from providing digital services in Uganda to a customer in Uganda at the rate of 5%.”
According to details in The Income Tax Amendment Bill 2023, digital companies eligible of paying this tax included those companies whose income is derived from providing a digital service in Uganda to a customer in Uganda, if the digital service is delivered over the internet, electronic network or an online platform.
The Bill further stipulates, that the digital companies eligible for this tax included; (a) online advertising services;
(b) data services;
(c) services delivered through an online market place or intermediation platform, including an accommodation online market place, a vehicle hire online market place and any other transport online market place;
(d) digital content services, including accessing and downloading of digital content;
(e) online gaming services;
(f) cloud computing services;
(g) data ware housing;
(h) services, other than those services in this subsection, delivered through a social media platform or an internet search engine; and any other digital services as the Minister may
prescribe by statutory instrument made under this Act.
It should be recalled that in May 2018, Parliament approved a daily Shs200 levy on social media sites, with Government arguing that the tax measure would bring in Shs284Bn. However, Government later rescinded on this move over poor compliance from users, prompting Government to impose the levy on internet.
In 2016, the United Nations Human Rights Council released a non-binding resolution noting that the internet is a catalyst for the enjoyment of human rights, most notably, the right to freedom of expression and condemned intentional disruption of internet access by governments, further reaffirming that “the same rights people have offline must also be protected online.
However, President Museveni has on many occasions not hidden his disdain for social media platforms, while defending the need to tax the platforms so as to curb on gossip in the public while at the same time raising revenue for Government.
However, human rights activists have rejected this argument by the President and instead argued that it’s aimed at curtailing the rights of Ugandans to freedom of speech and expression.
The tax bills were referred to the Finance Committee that has 45days within which to listen to views of members of the public, author a report with recommendations before Parliament takes final decision on the proposal.
