UCC: Ugandans continue to boycott OTT taxes, move less mobile money over levies

mobile money and social media taxes Pay OTT Tax

A significant number of Ugandans on the internet have refused to or withdrawn from paying social media and mobile money taxes which were introduced at the beginning of the 2018/19 financial year, a ‘third-quarter communication industry report’ released by the communications regulator has revealed.

According to the report, when social media taxes aka OTT taxes were introduced in July of 2018 — 8,049,413 people paid the tax, but this number, in August, reduced by 1.2 million people to 6,871,173, then to 6,844,528 in September.

The decline in the number of OTT taxpayers also meant a plunge in the revenue collected. Uganda Communications Commission, in the report, shows that the government collected over Shs4 billion in August of 2018 but the figure dropped to 3.9 billion in September. In July, over 5 billion had been collected.

According to UCC, “50.4% of the internet subscribers used OTT services by the end of September 2018.”

See: UCC: What we know about SIM card hacking

The report shows that the Uganda internet market is dominated by mobile internet compared to fixed internet, with mobile internet subscription standing at 13,572,396 up from 9,855,034 reflecting a growth of 38%. “Internet penetration now stands at 35%,” according to UCC.

Mobile money

When it came to mobile money, while the amount of cash deposited in digital wallets has grown, people have reduced on the number of transactions they make. The behavior has been chalked up to the introduction of mobile money taxes.

The current trends in digital banking indicate that people still prefer mobile money for deposits since they are not charged for keeping their money with mobile network operator like it is in banks. But they’ve reduced on the number of transactions in order to pay fewer taxes i.e. a person will withdraw a huge chunk of money to take them for a while instead of withdrawing in bits or they’ll only make a transaction when they must (i.e. it is a school fees payment).

According to the report, the value of mobile money transactions significantly dropped from Shs19.3 billion in the second quarter of 2018 before the introduction of mobile money tax to Shs14.8bn after introducing the tax in the third quarter.

This shows how the mobile money tax took a heavy toll on the value of transactions made via mobile money, which had been gradually growing, with authorities registering Shs18.1bn in the fourth quarter of 2017, then Shs18.8bn in the first quarter of 2018.

See: Uganda second largest mobile money market in Africa but new tax poses a threat – report

On a good note, the number of transactions made and balance on customer accounts posted outstanding growth. For instance, in the third quarter of 2018, 358, 272,314 transactions were made compared to 536,944,731 transactions made in the third quarter of 2018. Balance on customer accounts grew from Shs495,977,449,459 in the second quarter of 2018 to Shs1.9 trillion in the third quarter.

Uganda also continues to see a growth in the number of mobile money subscribers. The number grew by 5% from 22,7338,23 subscribers in the second quarter of 2018 to 23,948,565 in the third quarter of 2018.

“Positive growth has been registered in some transactions and balance in customer accounts with an increase of 50% and 141%,” UCC noted. “However, the value of trade declined by 24%. The decline in the amount of business could partly be explained by the introduction of mobile money tax.”

The report comes after the Ministry of ICT and National Guidance announced that it would be carrying out a probe into the impact of mobile money and social media taxes after which it will submit its findings to its counterparts in Finance and Economic Development.

The decline in social media taxes collected shows that some people prefer using VPNs to paying taxes. It should be remembered that the introduction of OTT taxes came shortly after UCC ordered internet service providers to block pornography.

Since now people also have to use VPNs to access illegal content, they find it unnecessary to pay OTT taxes.


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