For any economy and its people to thrive, a fair and just taxation system must be in existence. On November 14th, 2020, the Nile Post, a popular news tabloid reported that the government of the Republic of Uganda through the Ministry of Finance, Planning and Economic Development intends to levy a new digital service tax on online audio and video content providers in the next financial year. This was announced by Moses Kaggwa, the director of Economic Affairs at the Ministry of Finance on November 13th, 2020 while addressing attendants at the side-lines of the Forum aimed at putting the youth at the forefront of fiscal governance for a better Uganda. Kaggwa argued that the justification for the proposed digital service tax is one way to widen the country’s tax base so as to facilitate or fund its budget.
“We can amalgamate or match the transactions that have been done in the country or together with their value and we tax that base on the gross. We can have a tax linked to gross revenue from Uganda but we need corporation,” Moses Kaggwa said.
Key amongst the audio and visual content providers that will be affected by this policy if passed include; Netflix, iTunes, H.B.O., Amazon’s Prime Video, and Spotify. Unlike Over The Top (OTT) tax, the proposed digital service tax will be levied directly upon the service providers and not the end consumer of the services although, in the long run, it will be the final consumer to feel the pinch.
This move by the state has received criticism from a section of the public which refers to the proposed tax as unjust and unfair. Firstly, the proposed digital service tax expressly violates the “Equality” principle of a fair taxation system. This principle as explained by its proponent Professor Adam Smith who argued that a tax or tax system should be fair in its application to all tax payers. He adds that taxes should be based on an individual’s ability to pay and therefore, it is only fair that those with more income pay higher taxes than those with less. The “Turning promises into action: Gender equality in the 2030 agenda for sustainable development” report by the UN Women indicates that 70% of the world’s poorest people are women with the 4.4 million women more than men earning less 1.90$ a day. WOUGNET reports that only about 37 percent of women surveyed in ten selected cities in the world, Kampala inclusive are found to be using the internet compared to 59 percent of males yet the newly adopted UN SDGS include an important pledge to harness information and ICTS to advance and empower women. This clearly shows that women are more likely to be burdened by the digital service tax as compared to men who statistically have more disposable income. Therefore, the Ministry of Finance and all stake holders ought to conduct a tax impact assessment on the proposed digital service tax because it affects women more.
Additionally, the proposed digital service tax undermines women’s right of access to information as stipulated under Article 41 of the 1995 Constitution of the Republic of Uganda and the S.5 of the Access to Information Act of 2005. These provisions state that every individual in Uganda has right of access to information which includes that found on the internet. Considering the fact that women account for majority of the population that is under the poverty line, the proposed digital service tax is most likely to hinder women’s access to information availed by most of these digital service providers hence increasing the Digital Gender Divide. This only serves to undermine the great efforts that most stakeholders like WOUGNET have invested in ensuring that they close the gender gap in terms of access to information through use and access to the Internet. Recently while showing how the restriction of social network through the social media tax is a violation of human rights, Katerie Lakpa from WOUGNET in her article argued that sharing and receiving information freely is fundamental to democratic systems. In fact, real decisions should not be taken without relevant and accurate information. Similarly, the proposed digital service tax will only stifle the enjoyment of women’s fundamental right of accessing information availed by the affected service providers.
For these reasons, it is WOUGNET’s stand that the proposed digital service tax should not be passed because it is unreasonable, unnecessary, unfair and therefore unconstitutional. Additionally, the state should carry out an impact assessment of the proposed service tax to determine its inconsistences with civil rights and liberties.
Written By: Iribagiza David