The Excise Duty Amendment Bill 2018 that seeks to place a 1% tax on every transaction made by phone users on Mobile Money platforms and Shs 200 on social media, has been passed by Parliament.
The controversial tax proposals were given a green light by legislators on Wednesday exactly a month to the end of the fiscal year.
The Bill seeks to amend the Excise Duty Act, 2014 so as to among other things; introduce interest for unpaid duty and limit the interest payable to the amount of the unpaid principal tax, amend the excise duty on telecommunications services and enhance excise duty in respect of certain excisable goods.
It further seeks to introduce excise duty on cooking oil and on motorcycles at first registration.
Government says the amendments in the tax regime will help mobilize close to Shs 1 trillion that will supplement the already low domestic tax revenue.
In this current financial year 2017/18, URA has a net revenue target of slightly over Shs15 trillion out of the Shs 29 trillion budget. But the tax body is faced with a burden of tax defaulters and thus could fail to hit its target.
During Wednesday’s debate in Parliament, some of the legislators were opposed to the proposed taxes which they say could further hurt the already low income earners.
On the issue of the social media tax, some of the MPs questioned the rationale behind taxing a service that is already being taxed on the cost of airtime.
When the proposal first emerged, many Ugandans including rights activists and digital communication experts were opposed to it saying it was likely to limit access to the internet.
The Bill provides that the social media tax will be levied Shs 200 daily on every mobile phone user subscriber in Uganda who uses platforms such as WhatsApp, Twitter and Facebook. Each user will pay Shs 73,000 annually.
However, other MPs backed the Bill largely on grounds that it would expand on the country’s tax base. Other proponents said it was unfair for consumers to buy airtime and use it to make voice calls yet others use it for internet and make voice calls.
Relatedly, Parliamentarians have passed the proposal to have a 1% tax slapped on the value of mobile money transactions. Government targets to collect Shs 115 bn annually from such transactions.
It should be noted that the majority of Ugandans rely on Mobile money platforms to send, receive and keep their money. Today, almost every registered mobile user transacts through these platforms due to their convenience.
However, Winnie Kizza, the Leader of Opposition in Parliament made a submission questioning why government hadn’t instead considered increasing taxes on items such as beer, spirits often sold in sachets and cigarettes that pose a health danger to the population.
But the Committee of Budget dropped the proposal to impose Excise duty on soft drinks arguing that the current tax is already the highest in the region and further taxation is bound to encourage smuggling of soft drinks from the neighboring countries.