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!---
Join Tekedia Capital and build Next Africa with min of $10,000 in startups.