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Media tax: Is there convinience of taxation

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Added 28th June 2018 09:55 AM

The proposals are aimed at increasing the tax base since many people in Uganda are connected to the Internet and use the said OTTs.

Media tax: Is there convinience of taxation

The proposals are aimed at increasing the tax base since many people in Uganda are connected to the Internet and use the said OTTs.

TAXATION

By Ian Mutibwa

KAMPALA - The media is awash with the taxation of Over the Top Services (OTTS) or rather the social media tax that was proposed in the 2018 Excise Duty Act.

The Proposals in Uganda are to the effect that over the top services (OTTS) shall be taxed Ug shs 200 per day of access.

The proposed law further provides that there shall be NIL tax on Internet data.

The burden of accounting for tax is on the telecommunications service provider.

The proposed law specifically provides that OTTS mean the transmission or receipt of voice or messages over the internet protocol network and includes access to virtual private networks but does not include educational or research sites prescribed by the Minister by notice in a gazette.

The proposals are aimed at increasing the tax base since many people in Uganda are connected to the Internet and use the said OTTs.

However, in order to understand the rationale of this proposed tax, there is need to appreciate the definitions of OTTs and Internet Data.

Over-the-top content (OTT) is the audio, video, and other media content delivered over the Internet without the involvement of a multiple-system operator (MSO) in the control or distribution of the content.

Consumers can access OTT content through Internet-connected devices, smart TVs, set-top boxes, gaming consoles and desktop and laptop computers and tablets.

Examples of these include mobile phones, play station consoles, apple TVs among others.

These OTTS may be Voice, messaging and examples include Facebook, Instagram, Snap chat, WhatsApp, Viber, WeChat, Skype etc.

Internet data on the other hand is information that has been translated into a form that is efficient for movement or processing. Relative to today's computers and transmission media, data is information converted into binary digital form. In the simplest of terms, Internet data is information that is shared through an internet medium.

Back to our legal provisions in the proposed law, Internet data carries a NIL tax whereas the OTTS carry Ug shs 200 per day. Therein lies the first absurdity. Data in itself is the information that is transmitted on the OTTs.

In my opinion, therefore there is no exemption of data per say as the use of the OTTs is primarily to transfer data/information. What I imagine the law makers wanted to exempt is the bandwidth which is the medium where data is carried.

Unfortunately, in Uganda and many parts of the world, we colloquially call bandwidth "internet data" and this colloquial term has cropped into the national legislation. So, for purposes of appreciating the legislation, we shall refer to bandwidth as internet data.

Be that as it may, the issue of taxation of OTTs is still very unclear. I will illustrate through examples: First the law places the burden to account for the excise duty is placed on the telecommunications service provider.

The framers of the law may not have addressed the fact that many of the OTTs may be used on tablets, laptops and smart TVs.

Whereas the routers and modems that power these devices have sim cards, the mobile service provider may not know about their use.

How then will they account for excise duty when they are not aware that there are such devices using the OTTs.

In addition, the "internet data" that these smart devices use is exempt.

In addition, the tax seems to be unfair in that it indiscriminately levies a fee of Ug shs 200.

The ordinary Ugandan who loads Ug shs 500 of data to communicate to his friend shall have to pay Ug shs 200 extra for the same.

Juxtapose this with the moderately upper scale Ugandan who can afford data of say Ug shs 30,000.

They shall be subjected to the same tax as a fixed rate. In my opinion, this levy should have been advoleram so that it caters for the different usages.

The mechanism of enforcement of what is educational and research is also subject to debate.

Whereas a research from the Institute of Social research may consider a certain video shared as part of their research, an ordinary Ugandan may find the same video a leisure video.

How will the telecommunications service provider separate these uses?

What then happens when one communicates educational material on their WhatsApp and then non-educational or research material on Facebook or Snapchat. Will the telecommunications Companies follow this usage?

These are some of the questions that government may have to answer before they levy the said tax on Ugandans.

Without the said answers, there is a risk of double or triple taxation or no taxation at all.

The writer is a team leader, Tax, Banking and Finance, Signum Advocates.

 

 

 

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