New tax: Govt advised to tax online adverts instead of internet

Female developers

Female developers

Instead of taxing the internet, the government can explore the possibility of taxing online advertising and content promoters, civil society and activists have advised.   

Early this month, Finance minister Matia Kasaija announced at least 12 new tax measures through which the government intends to increase its revenue collections in the financial year 2012/22.

One of the measures is the introduction of a 12 per cent tax on the internet. However, Unwanted Witness Uganda, a civil society organization that advocates for internet freedoms, cautions that the proposal will instead raise the cost of the internet, and limit its usage amongst Ugandans.

Dorothy Mukasa, the chief executive officer at Unwanted Witness explains that raising the cost of the internet through an additional tax is a slap in the face of digital innovators who can potentially create more revenue sources through creating employment. 

She advises that the government undertakes interventions aimed at increasing internet utilization in the country, through boosting its speed and improving connectivity. As a result, she adds, the government will realise more revenues through the already existing initiatives.

"The sector is already grappling. According to statistics, Uganda has the highest cost of internet. That means internet is high, it also brings a high cost of doing business in this country. And therefore the return on investment is going to be really low, therefore government is not going to get the tax that it wants. We don’t have to increase the already high cost of internet in the country. Government would rather begin discussing how do we increase the speed first of all and then how do you increase connectivity before thinking of taxes because automatically if there is high internet speed and people are able to use the internet, business will be booming and government will reap," said Mukasa. 

As an alternative to taxation, Mukasa has advised the government to explore options of taxing online advertisers and international corporations operating on the internet such as Facebook and Google, whom she says are earning colossal sums of money from their subscribers including Ugandans.     

Livingstone Muweesi, an online car broker in Masaka also argues that the government should instead cut down the cost of the internet which he says complements many other sources of revenue.  He says that if adopted, the proposed tax will have a negative impact on many other businesses platforms that operate online.

“The internet has simplified the way we do business, and we pay taxes on everything on everything that is imported. Actually, the government ought to find ways of supporting internet users instead of taxing them further,” he noted.   

Meanwhile, the speaker of parliament referred the entire tax proposal to the committee on Finance, from where it is being considered before the completing budgeting process is completed before May.

© 2016 Observer Media Ltd