Africa seeking united front on taxing digital economy
URA was this financial year given a steep target of Ush 21.8 trillion which was later revised downwards to Ush 19 trillion due to the anticipated effects of Covid-19. However, URA has since registered surpluses in tax collection to which the commissioner-general said was partly as a result of lowered targets.
The Authority said it would employ technology in its endeavours to plug tax leakages such as identifying potential taxpayers in the real estate sector, the electronic fiscal receipting and invoicing solution and digital tax stamps among others.
African countries, through African Tax Administration Forum (ATAF) are seeking ways as a bloc through which they can tax the digital economy, which continues to present difficulties for tax authorities across the continent. Big tech giants such as Google and Facebook, among others, rack up huge amounts of revenue from low income earning economies but do not contribute much to the growth of such economies
Big tech giants such as Google and Facebook, among others, rack up huge amounts of revenue from low income earning economies but do not contribute much to the growth of such economies.
Ugandan government imposed a Ush 200 levy on social media access, introducing a tax - over the top tax (OTT) in May 2018, which remains highly controversial. This tax is levied in the nature of digital service tax to prevent “gossip” and broaden the country’s tax base.
In Tanzania, to curb hate speech and fake news, the government introduced the Electronic and Postal Communications Regulations, 2018, for bloggers, online radio and television requiring them to pay an annual fee of $900.
Kenya has also recently joined Uganda and Tanzania in taxing digital services, primarily to support its depleted public coffers in an economy weighed down by slowing private sector activities, shrinking revenue collections, growing public debt and increasing expenditure pressures.
The new tax has imposed at 1.5% of gross income derived from all services offered through the digital marketplace including downloadable content such as mobile apps, e-books and films, and over-the-top services that include streaming television shows, films, music, podcasts and any other digital content. ATAF believes they can build capacity under an alliance to plan a better and more efficient way of taxing tech giants, some of which command huge budgets that are bigger than most African countries.
However, ATAF notes that lack of political will from the African elite, leadership and the overshadowing of African views by other countries of the Organisation for Economic Cooperation and Development, presents some challenges.
The digital economy has grown at a supersonic speed with the emergence of Covid-19, which forced businesses to shift to digital operations, which came with a lot of innovations.
It is worth noting here that at least:
Video streaming platform, Netflix which earns money from the video content, is also budding in Uganda. Whereas Uganda remains an insignificant market for major tech giants, Statistica puts video streaming penetration in Africa at 10.5% in 2020 and is expected to hit 14.2% by 2024 with revenue in the Video Streaming segment amounting to $1.1b in 2020.
Only time will tell what Uganda’s future holds for the digital economy.
Video streaming platform, Netflix which earns money from the video content, is also budding in Uganda.
