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Minister Tumwebaze Explains Social Media Tax Reports

Uganda’s ICT Minister, Frank Tumwebaze has spoken out on the controversial social media tax proposal.

Tumwebaze who was on Tuesday briefing the media about cabinet deliberations held on Monday said the proposal by the president had been misunderstood.

“No body has proposed a social media tax. The proposal by the president doesn’t seek to tax anyone using social media but specific applications,” Tumwebaze said.

He added, “The proposal seeks to levy tax on things like Skype and WhatsApp calls. The Finance ministry will examine the proposal and present it to parliament if they find possibility of increasing revenue.”

Last week, the country’s president in a letter proposed that the tax body explore options of widening the country’s tax base by levying a fee on social media users, sparking wild debate on social media sites.

“I am not going to propose a tax on internet use for educational, research or reference purposes… these must remain free. However, olugambo on social media (opinions, prejudices, insults, friendly chats) and advertisements by Google and I do not know who else must pay tax because we need resources to cope with the consequences of their lugambo,” Museveni wrote.

Explaining the need for a tax on WhatsApp and Skype calls among others, Tumwebaze revealed that government is investing in connectivity across the country and revenue firm the sector needed to be expanded.

“Instead if giving money to the owners of these applications, it’ better for government to tap that money to develop the country so that people from upcountry can also enjoy the benefits of better connectivity,” Tumwebaze explained.

He also made reference to the European Union Digital tax to send his point home.

Last month, the European Commission proposed new rules to ensure that digital business activities are taxed in a fair and growth-friendly way in the EU. The measures are aimed at making the EU a global leader in designing tax laws fit for the modern economy and the digital age.

The recent boom in digital businesses, such as social media companies, collaborative platforms and online content providers, has made a great contribution to economic growth in the EU. But current tax rules were not designed to cater for those companies that are global, virtual or have little or no physical presence. The change has been dramatic: 9 of the world’s top 20 companies by market capitalisation are now digital, compared to 1 in 20 ten years ago. The challenge is to make the most of this trend, while ensuring that digital companies also contribute their fair share of tax.

If not, there is a real risk to Member State public revenues: digital companies currently have an average effective tax rate half that of the traditional economy in the EU.

The proposals came as Member States sought permanent and lasting solutions to ensure a fair share of tax revenues from online activities, as urgently called for by EU leaders in October 2017 . Profits made through lucrative activities, such as selling user-generated data and content, are not captured by today’s tax rules. Member States are now starting to seek fast, unilateral solutions to tax digital activities, which creates a legal minefield and tax uncertainty for business. A coordinated approach is the only way to ensure that the digital economy is taxed in a fair, growth-friendly and sustainable way.

It is this kind of strategy that the Uganda government wants to implement.

“The proposal if pssed won’t stop people from using applications like Google. It doesn’t mean you won’t be able to share pictures on Facebook and Instagram,” Tumwebaze explained.

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