Finance Minister: Matia Kasaija.

Parliament yesterday bowed to President Museveni’s orders and approved proposals to tax mobile money transactions and social media, meaning Ugandans come the financial year 2018/19 will have to painfully dig deeper into their pockets to enjoy the two services.

The decision followed a heated debate by Members of Parliament (MPs) on the report of the Finance Committee on suggestions presented by the government through the Excise Duty (Amendment) Bill which is aimed at raising more revenue domestically to fund infrastructural government projects as well as delivery of services.

The approval means that each person using social media platforms like WhatsApp, Twitter, Facebook, You Tube, Viber and Skype among others, will be subjected to a daily levy of Shs200 while each mobile money transaction will be subjected to a 1 per cent excise duty. The government is projecting to collect Shs284 billion from the measures.

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Also approved is the Shs200 levy on every litre of cooking oil, Shs100 for every litre of diesel and petrol, Shs650 on each litre of Opaque beer, Shs150 per litre on ready to drink spirits and Shs200 for every litre of non-alcoholic beverages with the exception of fruit or vegetable juices.

However, MPs in the same Bill reduced excise duty on soft drinks from 13 to 12 per cent and exempted sugar confectionaries including chewing gum, sweets and chocolates to enhance Uganda’s competitiveness in the East African region where countries have exempted confectionaries.

However during the debate, MPs showed different opinions on the tax measures. The Leader of Opposition Winifred Kiiza, Bungokho North MP Gershom Sizomu Wambedde, Manjiya MP John Baptist Nambeshe, Bukoto East MP Florence Namayanja, Kassanda County MP Patrick Nsamba Oshabe and several others opposed the 1 per cent tax on mobile money transactions saying that it would exclude the majority of Ugandans from financial transactions.

Aruu Country MP Odonga Otto supported the tax on social media, saying Ugandan citizens can afford it on a daily basis.

The proposed tax measures were ordered by the President in a March 12 letter to Finance minister Matia Kasaija.
“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,” Mr Museveni wrote.

The government expects to generate Shs951 billion from all the proposed new policy measures and anotherShs272b from administrative efficiency. In the financial year 2018/19, government plans to collect a total of Shs16.2 trillion tax revenue, which is a task the Uganda Revenue Authority (URA). In the current financial year that ends in early June this year, URA was tasked to collect just above Shs15 trillion as tax revenue.

In the financial year 2016/17, URA collected Shs13 trillion which was less than half of the national budget of Shs 29 trillion. In order to cover the deficit, the government had to borrow externally and domestically, as well as sourcing from development partners. Analysts say URA is unlikely to collect Shs15 trillion tax revenue in the current financial year given the slow growth of the economy.

Despite the approval of new tax measures, MPs on the ICT and the Budget Committees of Parliament recently urged President Museveni and Minister Kasaija to put more efforts in the fight against corruption and other forms of financial indiscipline in government institutions in order to save the funds needed for service delivery.

The legislators referred to a 2016 survey by the Public Procurement and Disposal of Public Assets Authority (PPDA) that revealed the embezzlement of public money through inflated procurement deals, pointing at Education and Defence ministries among the worst thieving government agencies.

The PPDA survey blamed political meddling in the procurement processes, impunity and a decadent culture that loves wealth accumulation in the shortest time possible. In 2005, the World Bank estimated that Uganda loses more than US $300 million through corruption and procurement malpractices every year.

Further a number of Civil Society Organizations including Tax Justice Alliance Uganda and Consumer Education Trust and Civil Society Budget Advocacy Group (CSBAG) among others, argue that the proposed taxes are regressive to the ordinary Ugandans.

“Mobile money is currently a tool used by a cross section of Ugandans. We observe that this tax is regressive, it does not consider the income differences in the population and will hinder financial inclusiveness,” Nelly Businge from the Tax Justice Alliance said recently.

Mr Businge advised the committee to differ the tax until a thorough and comprehensive plan to tax internet and online services is formulated.

Livingstone Ssewanyana, Foundation for Human Rights Initiative (FHRI) executive director is of the view that as government widens the tax base it should be mindful of access to information. He says social media tax is an attempt to undermine individual freedoms of Ugandans, further statting that People are already paying VAT, PAYE, and Property Tax and are complaining. He says social media tax will further burden Ugandans. “Government collects a lot of money already, what it needs to deal with is corruption,” he says.

The World Bank has in the recent times urged government to widen its tax base to collect revenues domestically instead of relying on external borrowing that has continued to raise the country’s debt.

In March this year, Bank of Uganda warned that the country’s public debt which had reached US $15.1 billion or 50 per cent of the gross domestic product. It was US $ 6 billion three years ago. BOU said the huge debt could among others affect the country’s economic growth because of reduced public investment.