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World Bank tells govt to scrap 'failed' social media tax

World Bank advises government to scrap OTT

World Bank advises government to scrap OTT

The World Bank has asked the Uganda government to abolish over-the-top tax (OTT). The organisation, a big lender to government argues that the move could boost access to coronavirus prevention messages for the vulnerable populations.

This is the first time the organization is openly calling for the abolition of OTT popularly known as social media tax. The World Bank says in its Uganda economic update 2020 report, that the tax has not achieved its intended objective because “the tax is difficult to collect and easy to bypass by more technically-savvy users.”

It adds that the social media tax is instead reducing “the proportion of internet users and widening digital and income inequality and should be re-evaluated”.

In 2018, the government imposed a Shs 200 daily tax on use of social media. The tax was expected to raise at least Shs 284 billion in 2018/19 financial year. The government was only able to collect Shs 49.5 billion of that, with majority Ugandans preferring to use virtual private networks (VPN) to bypass the tax.

Some people who could not use VPN simply avoided social media platforms. However, with the country facing coronavirus pandemic and the suggestion that campaigns for the 2021 elections be done virtually either on social media or traditional media like radios and newspapers, the tax must be removed for wider accessibility.

“Removing the social media tax would contribute positively to the COVID-19 crisis response and encourage the use of the internet and digital technology in Uganda,” the World Bank says.

“The availability of digital services such as online shopping, food delivery, social media, instant messaging, and online entertainment allows people in self-isolation to remain connected and socially and economically active while at home.”

It added that “governments can promote affordability by removing taxes and levies applied to specific digital platforms and services, thereby reducing transaction costs and supporting telecommunications companies in lowering prices for services that are needed during the crisis. In the long run, this is also likely to broaden the tax base.”

It says there is a need to reduce taxes imposed on mobile money services. It says even if the tax was removed, mobile money services would still contribute to the tax base through the 10 per cent excise duty on mobile money transaction fees introduced in the 2013/14 budget year.

This would generate on average 6 per cent of total excise duty revenues, the World Bank says. There is also the 18 per cent value added tax applied to mobile money transaction fees. 

“The continued imposition of the mobile money withdrawal tax could slow the achievement of key priorities including greater financial inclusion, promotion and adoption of digital payments, and reducing the use of cash during the pandemic,” it says.

Comments

+2 #1 Akot 2020-07-11 18:15
[World Bank says..., the tax has not achieved its intended objective because “the tax is difficult to collect and easy to bypass by more technically-savvy users.]

Really!

When it's users not tracable & avoid taxation to survive, WB becomes nervous & vocal!

But when it's Museveni & other shitholes rulers not accountable, the body is silent, knowing it will get back money loaned with interests!

WB knows shitholes from which it gets so much interests don't use the loans for countries development & people are poor without basic essentials; but this doesn't concern the WB that wants more taxes as right of birth!

Does WB loot USA or Well governed EU countries as it does with shitholes?
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+4 #2 Akot 2020-07-11 18:23
How can World Bank loan money to Uganda, tribalistically divided & ruled by migrant Museveni who controls every institution, including parliament, since 1986 & allows no opposition?

Does Museveni use loans from WB on; Education, Training, Healthcare, Social Housing...& the result is appreciated by the body that now claims/wants more taxes from Ugandans so well served in their developed country?

Ah! World Bank is so proud of looting shitholes to allow continuity of destruction by useless rulers, as no one ever calls them to order nor accoubtability!
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+3 #3 Jonathan Luyirika 2020-07-11 23:26
Paying tax is not bad idea but the problem in Uganda, in particular and Africa ,in general is that the money collected from tax doesn't reflect on the ground which makes paying tax useless and irrelevant.

If the money from the tax reflects on the ground, the government doesn't need to force people to pay tax.
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+1 #4 Amooti Mugi 2020-07-12 03:27
I wish African leaders could analyze issues in their details, but they have no capacity...

With OTT, poor Ugandans will not afford to have their children in lockdown study on such platforms when they are struggling to find food, and online campaigns many people have no smart phones that could enable them attend to their candidates, and of course can't get China flu prevention messages !

Take for instance, online learning that is being popularized in Uganda, who will pay for data/MBs for the private school teachers who are now laid off?

And for private institutions of higher learning,where will they get the money when parents can't pay tuition and fees because they exhausted their savings during China flu lockdown...
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0 #5 Nayenga Nekemia 2020-07-12 06:57
I hope the government takes note of this World band advise. Tax collection in the third world benefits very few and OTT is no excemption.

Uganda would benefit far much better from the removal of this tax as this is likely to increase connectivity a major pillar of development.

Mobile money tax is another unwanted economic hindrance Uganda can do without as it leads to low cash turnover.

The digital economy needs support and not punishment, the developed economies ride on digital economy and there is no end to their growth. Examples such as amazon, apple, e-bay, google, facebook are all digital services that are leading in how the world is run, making billions of profit hence contributing significantly to the tax base of their parent economies. Uganda should draw a leaf from this.
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+1 #6 Marvin 2020-07-12 09:41
Seriously i don't understand the thinking of the Leaders in this government, Do they want to increase internet penetration or not?

Seriously ugandans were in educations group , livestock and other farming groups but our leaders with all their genius found it wise to put OTT tax.

Ugandans lets vote for leaders who are visionary not these reactive leaders of ours
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0 #7 kabayekka 2020-07-12 14:08
That is why former President of Tanzania was a great African economic leader.

He stood firm with the World Bank and IMF. This is a world bank that has just lent this African poor country lots of money.

How then is this poor country going to pay back this money if it fails to collect lots of revenue?
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0 #8 Waswa Hassan 2020-07-12 15:12
World Bank calls for scrapping of OTT tax
My comment.

When I compare OTT with Cost of MBs, what the bank ought to advocate for is the reduction of that cost (of MBs). 15MBs that cost shs 250 is wiped/"eaten" in a few seconds.

By extension, in a day you need a minimum of shs 1000 to check your whatsapp and reading a few pages of news.
Nobody knows the real cost of MBs and therefore telecom multinational fleece us off as they wish.

In my opinion, the world bank better knows where the real problem is, but because they are partners (Financial Development institutions and multinationals further the same "structural adjustment" objectives) in crime they keep a blind eye.
The writer is an Economist (MA)
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0 #9 Waswa Hassan 2020-07-12 17:01
When I compare OTT with Cost of MBs, what the bank ought to advocate for is the reduction of that cost (of MBs). 15MBs that cost shs 250 is wiped/"eaten" in a few seconds. By extension, in a day you need a minimum of shs 1000 to check your whatsapp and reading a few pages of news.
Nobody knows the real cost of MBs and therefore telecom multinational fleece us off as they wish.

In my opinion, the world bank better knows where the real problem is, but because they are partners (Financial Development institutions and multinationals further the same "structural adjustment" objectives) in crime they keep a blind eye.
The writer is an Economist (MA)
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0 #10 Webs 2020-07-12 18:11
As far as the OTT is concerned in Uganda I now envisage 2 scenarios: 1st Gov't will rubbish the WB advice: that even 1 billion generated from OTT is enough.

2nd Th regime feels safer when the intelligent people fail to access the social media to exchange ideas. The result is that during these digitized elections OTT is likely to be increased.
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