OPINION: Social Media Tax Was Severely Misconceived, Govt Should Target Content Providers

Dr. Gideon Rugari, the Head of Minimum Access Surgery Unit at Mulago National Referral Hospital

By Dr. Gideon Rugari

It’s now my contention that the Social Media Tax levied on social media users in Uganda, was severely misconceived.
I have studied Social Media Tax and it’s attendant challenges and this is what I have found:

Social Media Tax is major source of revenue for countries that host companies which provide Internet content; Internet Content Providers (ICPs). Examples are Google, Yahoo, Bing, YouTube & others that allow sharing like Facebook, Twitter etc.

These entities receive the biggest percentage of revenue on the entire activity, involving accessibility to the internet, including Social Media.
Revenue that is generated remotely by these companies is difficult to tax because of Jurisdictional & sovereignty issues.

However, there are international trade agreements that provide ways of making these companies pay and aggressive countries have exploited these to recover tax on this revenue which is mostly from marketing and advertising.

Other countries have passed domestic legislation that facilitated agreements on taxing these ICPs. This becomes very easy because international laws would compel the hosting country to companies to declare how much revenue was generated in a remote country. For example, the U.S will compel Google to declare to Uganda how much revenue was earned in Uganda in a specified period of time.

Other countries like China blocked all international ICPs and allowed local ones to grow and become global brands. It becomes easier to tax these ones & there is an added advantage of job creation.

Internet Service providers (ISPs) range from Internet cafes to server leasing entities to domain hosting entities. These companies are registered businesses and pay taxes accordingly.

Internet Access Providers (IAPs), are mainly telecommunication companies and allow the final user to access the internet. These also pay taxes accordingly.

Where then is the problem then? The problem is that an internet user pays for all the above, thereby paying tax except for the Internet Content.

Most of the content on the Internet is freely provided by ICPs. Users are allowed to use this content freely because they are also bombarded with unsolicited adverts from which ICPs generate huge sums of revenue.

It’s this revenue that should be the target of the State of Uganda. To be able to tax this revenue, International Trade Agreements have to be looked at. They should be complemented with domestic legislation which streamlines this enterprise.

To attempt to tax an individual internet user is a futile effort since there are many remote (virtual) IAPs. This happens because in many countries, Internet Access is free & there are many applications that have been designed to tap into this internet as long as one has the necessary hardware & operating system.

It’s therefore not possible to tax what can’t be enforced. The only way to deny Ugandans access to the internet is by blocking targeted ICPs: Facebook, Twitter and Whatsapp. This is, however not possible because, it also denies those who have paid taxes, access to these ICPs.

Let the line Ministries sit down, study international laws or bench mark from countries already taxing ICPs. This will go a long way to solve the issue of national revenue without running after individuals we can’t catch.

The writer is the Head Minimum Access Surgery Unit, Mulago National Referral Hospital.

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