Government lowers proposed tax on social media

David Bhati

State Minister for Finance, David Bahati presented new proposals to the Tax Bills in a bid to lower the proposed Excise Duty on Over the Top Media Services (OTT) from Shs 200 to Shs100 per day.

If passed assented to by the president, those who access and use OTT services, including WhatsApp platforms and Facebook video calls will pay Shs100 per day.

The proposed taxes have since prompted wide-ranging public uproar with many complaining of double taxation since data used to access the social media sites is taxed.

The proposals, contained in a document submitted before Parliament’s Committee on Finance by Bahati come as corrigenda to the tax proposals presented earlier this month.

The minister also introduced new changes meant to lower tax on confectionaries and soft drinks.

We propose to make a corrigendum [correction] to the Tax Amendment Bills 2018 to reduce Excise Duty on soft drinks from 13 percent or Shs 240 per litre to 12 percent or Shs 200,” said Bahati.

Committee Chairperson Henry Musasizi (NRM, Rubanda West) criticised the officials for rejecting a proposal by the Committee to bring the tax on soft drinks to 10 percent.

Since you recognize that there is need to lower the taxes, why don’t you bring it to 10 percent in accordance with the Committee recommendation made in the last financial year Musasizi asked.

Bahati, however, said any abrupt reduction to 10 percent would cost the government a loss of up to Shs28 billion in taxes, saying it better be brought down by one percentage point every financial year.

He said the move is intended to “enhance the competitiveness of locally made soft drinks”.

He said the proposal to remove Excise Duty on confectionaries, will discourage smuggling of the same from neighbouring countries which incentivize the products.

Prospective investors are to gain from the proposal as it seeks to reduce the threshold for the capital requirement on strategic investment by half to “encourage many investors to qualify for investing and operating industrial parks and strategic projects”, Bahati said.

MP Amos Lugoloobi (NRM, Ntenjeru North), also Budget Committee Chairperson, rejected the incentives, saying they encourage tax fraud and evasion.

It [tax exemptions] should come under the Investment Code Amendment Bill the criteria must be clear. This country is lacking strategic investors because we have not incentivized them,” said Lugoloobi.

He maintained that the policy is subject to abuse if officials are left with the discretion to determine who qualifies for the exemptions, the reason he wants a specific law to specify the requirements.

Bahati introduced an amendment to waive all taxes due and unpaid by the government, through amending the Tax Procedures Code (Amendment) Bill 2018.

In the run-up to the enactment of the Appropriation Bill 2018, the law that operationalizes the National Budget, a range of tax bills are amended.

Proposals to levy taxes of 10 percent on proceeds from Saccos, increase Mobile Money Commission taxes and to ban the importation of cars manufactured more than eight years ago, have all stoked controversy.

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