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Social media tax will hamper growth of financial services in Uganda

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Added 16th July 2018 10:12 AM

Social media has also been transforming the business arena in very significant ways

Social media tax will hamper growth of financial services in Uganda

Social media has also been transforming the business arena in very significant ways

By Derrick Ashemeza

Social media platforms were no longer considered as places where people simply connect and communicate in real time with the click of a button.

But platforms such as WeChat, LinkedIn, Google+ as well as the global powerhouse Facebook, are increasingly making social media central to people's lives in Uganda.

Research done and compiled by an independent Dublin-based Web Analytics firm, Stat Counter from September 2016 to August 2017,  identified that 85.81% of the people in Uganda are using these three devices for social media, desktop Pcs, mobiles and tablets to access Facebook, 6.19% for Visual discovering, 5.43 of Twitter, 0.99% of YouTube, o.44% of Google+ and 0.31% of LinkedIn.

Social media has also been transforming the business arena in very significant ways from improving customer services to allowing users to send money to others via online platforms. New financial technology companies have adopted the use of ATM services , online banking and SMS banking to allow people to access their  bank accounts through social media thus helping people to acquire loans from financial institutions.

Integration has been happening so quickly which shows that social media platforms may be banks of the future and Ugandan businesses have been quick to adopt to social media not only to promote and advertise their services but as an element of savvy business Strategies targeting regional and international audiences.

Financial technology has also emerged as its own industry, encompassing companies that use technology to make financial systems more efficient. According to the 2013/2014 Broadcasting and telecommunication report released by Uganda Communication Commission (UCC) shows that the number of internet users in the country stands at 88.5 million. Many of the companies use social medial to revolutionise the traditional business models that the finance sector has relied upon for decades.

There is no doubt in Ugandan business, the opportunities to successful market and growth of business both locally and regionally are going to be limited by the new OTT taxes on social media. The key areas that are going to be affected by this tax in the financial service sector are not only in Uganda but also online business and connections are going to be negatively impacted.

Customer services and marketing are going to be affected since a larger number of customers have been expecting real-time response from their services providers and customers have been able to share their expression and frustration on the services they are receiving which would help many companies to respond quickly to customers. The online marketing is also going to be greatly reduced as the tax is going to limit the customer relationship with companies and greatly affect the customer services as many people are going to be discouraged by the taxes on social media.                                                                                                 

Increasing costs and reducing efficiency. The use of social media platforms has also reduced the cost of customer services since banks in Uganda are using it as an alternative to online banking and an efficient way to process applications in the financial sector. Most banks have developed apps that allow users to send money, paying utility bills and recharging mobile phones

Generally, the future of financial services, financial inclusion and lower costs on social media and customer services has been steadily progressing through social media and to impose a tax on them is going to negatively affect the financial services as lower income earners will stop the use of social media in their day to day life. These taxes are regulations that will limit the potential benefits of social media to millions of people who would otherwise benefit from online services. 

Parliament has made a right move to review on the controversial taxes on mobile money and social media and the Prime Minister Ruhakana Rugunda has promised to introduce the amendment on Thursday, July 19, 2018, and this shows that the Government is taking into account the concerns of the public and the implications of the taxes. Tax is supposed to be fair, just and equitable.

The writer works with Uganda Debt Network



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