Africa-Press – Uganda. Parliament yesterday imposed a five percent tax on tech giants such as Facebook, Twitter and Netflix as requested by President Museveni.
Other companies affected by the new tax contained in Income Tax Amendment Bill, 2023 include Google, Amazon, and Uber, and any foreign-owned company offering services such as data, online gaming, accessing and downloading of digital content, and data warehousing.
“A tax is imposed on every non-resident person deriving income from providing digital services in Uganda to a customer in Uganda at the rate prescribed in Part IV of the Third Schedule to this Act,” Clause 86 A of the Bill states.
Schedule IV puts the income tax rate at five percent.
“For the purposes of subsection (l), income is derived from providing a digital service in Uganda to a customer in Uganda, if the digital service is delivered over the internet, electronic network or an online platform,” Section 2 of the clause states
Mr Henry Musasizi, the State minister of Finance-in-charge of General Duties, last week revealed that government estimates to collect Shs5b from this tax to contribute to the recently passed Shs52 trillion budget. Government is currently looking for any means possible to widen the tax base to reduce reliance on borrowing.
Parliament first passed the Bill in May, rejecting the tax on the premise that it would negatively affect Internet users.
President Museveni, however, in a letter read to the House on June 29, disagreed with the legislators’ reasoning and thus declined to assent to the Bill, recommitting the clause.
“Since it does not relate to residents in Uganda as was mistakenly in the minority report, it should be reinstated. The tax will be borne by the digital companies,” the President said.
In its report presented to the House yesterday, the Parliament Committee on Finance agreed with Mr Museveni.
“For emphasis, the committee noted that this is not a social media tax and will not affect an ordinary Ugandan in any way,” the committee stated.
It added: “If a Ugandan uses Uber in Uganda, the money goes to California and no tax is paid here because we do not have a charging section or source rule. Through this proposal, five percent of the money Ugandans pay to use Uber’s platform shall be reduced as a tax credit from the state of California.”
But in a minority report signed by Shadow Minister for Finance Muwanga Kivumbi and Budadiri West MP Nandala Mafabi, it was observed that the tax on these services will trickle down to the users in form of increased cost of Internet services.
“Our position is that the imposition of a tax on digital services providers, whether resident or non-resident, will have a ripple effect on the citizens. Whereby prices for Internet services will certainly be increased to mark up the imposed tax thus retarding our technological advancement,” Mr Mafabi, who presented the report, said.
The duo opined that the government should start with a lower tax of two percent, pending further studies on the effect of the new tax on technological advancement.
Kumi Municipality MP Silas Aogon wondered how the collection of the tax would be implemented while Wakiso Woman MP Betty Naluyimawarned that this may disrupt the country’s progression on the usage of the Internet.
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