This Is Why I’m Against the Mobile and Social Media Taxes

Nile Post News

By Muhereza Kyamutetera

Mr. President, since the infamous #SocialMediaTax and #MobileMoneyTax came into effect, there has been a big debate fueled by anger, about these taxes. Almost everybody has had unkind words about this tax except members of your government (for obvious reasons), yourself and two other gentlemen i.e. my friends Timothy Kalyegira and Andrew Mwenda.

In my estimation, there are two basic arguments being made; one is that social media is a luxury that ought to be taxed (this is a view largely shared by the president alone) and the second common strand is that Uganda is not collecting enough tax to finance the many needs and wants of its population.

First of all, Mr. President, you should fire whoever has misled you about social media. According to latest research, as of January 2018, out of a population of 7.6 billion people, there were 4 billion users of internet (53% penetration). Of these, there were 3.2 billion active social media users (42% penetration), 3 billion people (39% penetration) of whom, accessed the internet on their mobile devices, meaning they were reachable almost 24/7.

You might not know, but when we are not gossiping we are transacting business on social media. Today, with Skype, I can conduct a meeting with 3 of my partners, one in India, another in the UK and another in the United States- all from my office- all at a cost of less than Shs2,000.

There is so much e-commerce that we can be able to do and are doing on the various ‘lugambo’ platforms such as Facebook, Whatsapp, Viber, Telegram etc. As a key promoter of export-led markets, I am shocked that you think social media is for lugambo. Matter of fact, social media is replacing conventional websites as a communication tool. For example, while the website attracts less than 5,000 visitors a month, your Facebook page alone is followed by over 410,000 people from all over the world.

Imagine what you can sell to these people if you really wanted to!!

You and in fact your entire cabinet need to wake up to the new reality that is social media. In fact you should subject all your key government people to a digital exam and get rid of whoever can’t score 50%, because social/digital is not the future, digital is the present.

That aside, while I agree with you that Uganda does not collect enough taxes to feed its ever-growing needs, I do not agree with you on your attempts to keep on lumping taxes on one group of the population and the detriment of the other.

It is true that our tax-to-GDP ratio, at an estimated 14-15%, is too low, and it is believed that it will not grow fast enough to reach the EAC Monetary Union Protocol threshold of 25% by FY2021/22. Again, according to Paying Taxes 2018, a report by PriceWaterhouseCoopers and The World Bank Group, our tax regime is fair, with average tax rates of 33.7% (22% profit-related taxes and 11.3% labour-related taxes) compared to the Africa Average of 47.1%. While we are at per with Rwanda (33.2%), we are better than Kenya (37.4%), Ethiopia (38.6%) and Tanzania (44.1%), according to the report.

Even in terms of efficiency and tax administration, Uganda does well- it takes about 195 hours on average to comply with most taxes, way better than the 285 hours average for the African continent.
So what is the problem then? Why are Ugandans resisting this minute increase in taxes?

I did a simple poll on Twitter and out of the 372 people who took part in the poll, the majority (50%) said they did not believe the tax was high but rather, their fears lay in the fact that they did not trust their government to put the additional tax to good use.

This confirmed a belief that I had earlier and therefore forms the basis of my 5 cents of what I presume to be wisdom. In my view, I do believe that the problem and or the solution lies in addressing the following 2 fundamental things.

1. Maximising value on the tax paid through increased government efficiency, fighting corruption and funding the appropriate priorities as laid out in national strategies.

2. Depoliticizing tax administration by ensuring everybody, including the informal sector (who are seen as untouchable voters by politicians) pick their fair share of the tax burden.

Speaking about delivering value, I have come to believe that simply increasing the resource envelope will not necessarily result into better life for Ugandans if key fundamentals are not fixed.
For example, between 2012/13 and 2016/17, courtesy of the tax payers and donors, the resource envelope given to government, was increased by 136.3% from UGX11.6 trillion to UGX26.4 trillion and what did we get?

The number of poor people in Uganda instead increased by 51% from 6.7 million in 2012/13 to 10.1 million people in 2016/17 according to the Uganda National Household Survey 2016/17 done by Uganda Bureau of Standards (UBOS). According to the same report, the proportion of people leaving below the poverty line grew to 27% from 19.7% in the same period.

Mr. President, what this says is that without focusing on budget discipline and efficiency, simply giving you more money won’t help us a single bit.
If you cannot fix corruption that according to the IGG reports stands at 97.9%, you should forget that Ugandans, will keep on giving. There is something to learn from countries such as Botswana, Cape Verde, Rwanda and Mauritius where, according to the Transparency International Global Corruption Barometer 2017, less than 5% of their citizens indicated they paid a bribe when they came into contact with a public servant.

In Uganda, our score is 38%.

Wide gaps between Strategy and execution
Secondly you also need to fix the wide gaps between strategy and execution by your government. While your government has a great vision for Uganda; “a transformed Ugandan society from a peasant to a modern and prosperous country within 30 years- with a per capital income of USD9,500”, we all know that vision/faith without action is dead.
As the Chief Executive Officer of Uganda Limited, how do you explain that, the 2018/19 budget only mirrored 42% of the National Development Plan II?

According the Budget Committee, it was extremely difficult to “link the National Budget Framework paper of FY2017/18 and that proposed for FY2018/19. The programme indicators are different hence making it almost impossible to track progress and quality of targets,” they noted. The committee also noted that there was “a great mismatch in alignment of strategic plans for sectors, ministries, departments and agencies as well as local governments to the National Development Plan. Hence the foundations of the National Budget Framework Paper FY2018/19 are inconsistent with the National Development Plan.”

So basically, we want to go west, but our budgets are financing a North East plan?

If people do not see value for the little money they are paying, they do not see reason for paying more tax, even if it is just a 1% increment.

Recently I did an interview with Doris Akol, URA Commissioner General for my blog and this is what she had to say about the relationship between tax compliance and government efficiency and or delivery of services.

“There is a direct correlation between what we call tax morale and tax compliance. Tax morale is the perception that people have that they are getting value for money for the taxes they pay and therefore their enthusiasm to pay tax or to be compliant grows. There is a direct relationship between the tax morale and tax compliance. So when people perceive that they are not getting value for their money, the tax morale will be low.”

Depoliticise tax administration

Regarding the issue of politicization of tax, Mr President, it is high time you reconsidered your ban on graduated tax. With all its issues, graduated tax, provided an easy platform for taxing Uganda’s largely informal sector that is above 50% of GDP. Because tax assessment was done by the local councils who knew very well, the incomes of their village members, it was perhaps the next best perfect alternative to include the informal sector into the taxable fold.

This is the only way, coffee farmers, tomato growers, milk sellers and people with cattle can be made to pay income tax that can go to their respective districts and that way, the districts can stop exerting pressure on the central government coffers.

There is a temptation by politicians to confuse farmers with peasants- which is largely responsible for the fact that agriculture which contributes 27% of GDP, only contributes 2% of the entire tax collections! Regardless of your political ambitions in 2023, if you can successfully increase the tax contribution of the agriculture sector from 2% to may be 10%, this country will be able to increase our tax-to-GDP ratios, so you won’t have to heap senseless taxes on us, such as #SocialMediaTax and #MobileMoneyTax.

Otherwise to think that the same section of the public that is already suffering from high interest rates, high school fees, corruption, employment, high cost of doing business, high cost of private healthcare, high cost of energy, bad roads, government bureaucracy and over and above that, has to subsidize our rural kindred, should now face additional costs in trying to send money or communicate- is a tricky affair.

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