Uganda introduced social media tax on WhatsApp, Facebook, Instagram, etc to make more money from its citizens. It also bumped up tax on mobile money transfer. Unfortunately, it is not looking good: total revenue has dropped as citizens have decided to forget social media and mobile money to avoid more taxes. So, cash is back: “In the three months following the introduction of the levy in July 2018, there was a noted decline in the number of internet users, total revenues collected, as well as mobile money transactions”. That is from the regulator!

In the three months following the introduction of the levy in July 2018, there was a noted decline in the number of internet users, total revenues collected, as well as mobile money transactions. In a series of tweets, the Uganda Communications Commission noted internet subscription declined by more than 2.5 million users, while the sum of taxpayers from over-the-top (OTT) media services decreased by more than 1.2 million users. The value of mobile money transactions also fell by 4.5 trillion Ugandan shillings ($1.2 million).

“The decline in the amount of business could partly be explained by the introduction of mobile money tax,” the regulator said.

Uganda is one of the countries where citizens pay taxes to use Facebook, WhatsApp and other 58 social media related websites. Government had taken the action to “curb gossip” [read criticisms] in the nation. Of course, the offline gossip continues. Telcos deduct the tax based on usage by users. As the social media tax was introduced, government increased mobile money tax by 5%.

Of course, telcos simply increased prices across board on products to compensate for the additional taxes on products they were required to report. That is typical: you do not expect telcos to pay those taxes; they shift them to users. The result is clear: across all metrics, Uganda is going backwards on digital evolution. In short, the financial inclusion via mobile money is now imperiled as more citizens have moved to cash.
Kenya, Zambia and Zimbabwe which recently joined the social media party will likely arrive at the same conclusion.

A moving continent indeed where tax is seen as the solution to all paralyses! Hope this makes it clear that citizens are not stupid; more greed can deliver lesser tax revenues. In Physics, they have optical illusion; in Africa, we have monetary illusion.

The irony here was the government agency publishing the numbers on Twitter. Of course the regulator might have been exempted from tax. So, to read your government report, you will need to pay tax to visit Twitter – the government can use Twitter but citizens cannot it use freely!

Amazon shows the power in conglomerates and good-evil that comes with that power: $0 Conglomerate Tax on $11.2 billion profit. Yes, my small U.S. company will pay more taxes than Amazon as the U.S. ecommerce pioneer has a federal tax bill of $0. This is a company with a market cap of $800 billion but it is going through the American tax season with no cheque to send the taxman. In short, its tax rate is actually -1% if you consider that Amazon has $129 million 2018 federal income tax rebate. But Amazon is not atypical: from GE to Dangote Group to Carlos Slim’s empire, nations and the citizens pay “taxes” to conglomerates.

Those wondering how many zeros Amazon, which is valued at nearly $800 billion, has to pay in federal taxes might be surprised to learn that its check to the IRS will read exactly $0.00.

According to a report published by the Institute on Taxation and Economic (ITEP) policy Wednesday, the e-tail/retail/tech/entertainment/everything giant won’t have to pay a cent in federal taxes for the second year in a row.

This tax-free break comes even though Amazon almost doubled its U.S. profits from $5.6 billion to $11.2 billion between 2017 and 2018.

To top it off, Amazon actually reported a $129 million 2018 federal income tax rebate—making its tax rate -1%.

Amazon’s low (to non-existent) tax rate has been chided by politicians ranging from Senator Bernie Sanders to President Donald Trump.

In this piece, I explained that conglomerates tax nations because they fix critical market FRICTIONS. Yes, Conglomerate Tax is a global thing. U.S. government may waive taxes for GE but will not listen to Facebook because GE is a conglomerate. They are treated differently because they technically build nations. Government may have the money but may also need a special plastic for a new warplane. There are few companies that can deliver such products. So, a government may engage a company like GE to research and develop the plastic. The company can ask for concessions to take that risk. Those concessions are taxes to nations since the nations must still buy the plastics if the conglomerate succeeds.

For Amazon, cities want it and because they do, Amazon an extract tax benefits. Just like that, everyone is paying for Amazon not to pay taxes because the tax waivers or rebates are coming from taxes paid by ordinary people and companies. So, next time you see them talking about Dangote Group, laugh. The problem on Dangote Group special benefits in Nigeria is not the company but the fact that Nigeria has only Dangote Group. In America where they have legions of them, it is a new normal in modern capitalism. In these companies, you find entities which have accumulated capabilities to fix frictions at the upstream level.

Dangote Conglomerate Taxes

LinkedIn Comment on Feed

1. Corporations’ accounting profits may differ from their taxable profits due to capital allowance deductions and loss reliefs charged against their profits, often those deductibles are higher than the depreciations recognised in their financial statements. Nevertheless large corporations are notorious for implementing tax avoidance mechanisms including the use of tax havens. Some are even accused of investing as much money on tax avoidance schemes as on technological innovation and mostly with the complicity of accountants and lawyers who find loopholes in tax regimes. Whilst these corporations as legal persons pride themselves with corporate citizenship, they fail to adhere to a fundamental tenet of citizenship. The dead weight loss resulting from this syndrome is the ever increasing gap between the rich and the poor as the greater populace continue to grapple with the negative externalities of these corporations despite their seemingly positive net contribution to society.
2. Way beyond what ordinary folk can understand, so once a politician or an activist wipes up the sentiments, you see how the reactions go. You hear robbery, cheating, favouritism; in reality, it doesn’t work like that. When you need something desperately, obviously you are willing to cut any kind of deal, but when the other party begins to enjoy its dividends, envy and greed usually show up. If you need jobs and infrastructural development, you can forgo taxes, your citizens get the jobs, city and education institutions around benefit too. The problem starts when you want all the taxes, at same time you want jobs and development; the world was never configured to be that perfect!