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Government Moves to Tax Internet Data, Dumps OTT

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Government has decided to dump the OTT tax and instead introduce a new tax on all the purchases of internet data.

The Excise duty (Amendment) Bill, 2021 is proposing to repeal the payment of Over the Top Services Tax (OTT) commonly referred to as social media tax, while at the same time re-introduce excise duty at a rate of 12% on internet data.

This was revealed by Price Waterhouse Coopers (PwC) ahead of the tabling of the tax proposal bills by Finance Minister matia Kasaija in Parliament this afternoon.

The Excise duty (Amendment) Bill, 2021 is proposing to repeal the payment of Over The Top Services tax,(OTT), while at the same time re-introducing excise duty at a rate of 12% on internet data. There is an exclusion for data used for provision of medical and education services.

Parliament passed into law the Excise Duty Amendment Bill 2018, that imposed a Shs200 daily tax levy on Over the Top Services (OTT) like WhatsApp, Facebook and Twitter with Government projecting to collect Shs284Bn annually.

Government’s position is in line with the proposal made by Uganda Revenue Authority (URA) former Commissioner General, Doris Akol who asked Government to abolish OTT tax citing high rates of evasion among internet users in Uganda in January 2020.

However within a year of its enactment, URA only collected Shs49.5Bn out of the targeted Shs284Bn, leaving a shortfall of Shs234Bn. The collection further declined prompting URA to ask Parliament to scrap off OTT because Ugandans had resorted to using Virtual Private Networks (VPN) and wireless networks in their offices to avoid paying the tax.

Instead, URA proposed for an amendment of the Exercise Duty Act and has a policy shift to directly charge OTT on data than from mobile money.

Relatedly, Government is proposing an amendment to the External Trade (Amendment) Bill, 2021 and by imposing a levy of USD0.4 per kg to be charged on wheat bran, cotton cake, maize bran & other by-products of the milling industry exported out of Uganda. This levy shall be paid by the exporter to Government.

There is also a proposal to extent some tax exemptions to new manufactures with an investment capital of at least $50M & existing manufacturers with an additional investment of $50M will benefit from the proposed Stamp duty Amendment Bill 2021.

This group will receive Instruments such as debentures, leases, transfer of land will have a NIL stamp duty rate.

The Income Tax (Amendment) Bill, 2021 also proposes to increase the rental tax rate for individuals from 20% to 30%, similar to that of non-individuals and allow landlords to deduct 60% of rental income as notional expenses in calculating chargeable income.

The Income Tax (Amendment) Bill, 2021 introduces a proposal for landlords earning rental income from more than one rental property to account for the income and expenses on each property separately.

The Income Tax (Amendment) Bill, 2021 introduces a proposal for landlords earning rental income from more than one rental property to account for the income and expenses on each property separately.

Government is seeking to make amendments to the Traffic and Road safety Act (Amendment) Bill 2021, that if passed into law would require a person owning a motor vehicle, trailer or engineering plant will use it on a road only if it’s licensed under the Traffic and Road Safety Act. The annual fee is yet to be determined effective 1st July 2021.

Among the tax bills tabled by Finance Minister Matia Kasaija include; The Excise Duty (Amendment) Bill, 2021, The Fish (Amendment) Bill, 2021, The External Trade (Amendment) Bill, 2021 and The Income Tax (Amendment) Bill, 2021.

The other tax bills include; The Mining (Amendment) Bill, 2021, The Stamp Duty (Amendment) Bill, 2021, The Tax Appeals Tribunal (Amendment) Bill, 2021, The Tax Procedures Code (Amendment) Bill, 2021

The rest are; The Tobacco Control (Amendment) Bill, 2021, The Traffic And Road Safety Act (Amendment) Bill, 2021 and The Value Added Tax (Amendment) Bill, 2021.

Speaker Kadaga Referred The Tax Bills To Parliament’s Finance Committee for scrutiny before a final decision is taken.

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