The government must realise that in this global digital economy, social media users are playing a key role in generating value for digital companies and it is against these companies that it should seek most of the taxation and not the users.
I’m not a fan of lugambo (idle talk) on any day, but I hear that the Government of Uganda will levy a tax on social media users who engage in too much of it, in the hope that UGX400 billion will be generated every year. It is not proven that Ugandans use social media mainly for idle talk, though I don’t think there is much benefit in going down that road.
Whether this tax is supposed to stop or promote lugambo, I can’t say. What I know is that this supposed idle talk earned social media giant Facebook about USD5.85 billion in advertising revenue from overseas users in 2017 which is about a fifth of Uganda’s GDP standing at USD25.53 billion (2016).
Almost three million of the users who generated this income were from Uganda. Like they say, there is a silver lining on every dark cloud but it appears Government is handling this dark cloud of social media from the wrong end of the stick.
It is my argument that by proposing a further tax on social media users instead of the social media platform owners, the Government of Uganda has missed the silver lining. Other countries are handling this complex subject of digital taxation on social media in a superior way.
READ: Govt moots new tax on mobile money, smartphones and import of cars older than eight
Even though Uganda is entitled to formulate its own policies, it should deconstruct its approach to this social media tax on users and allow to be persuaded by best practices elsewhere. There is a raging debate in many jurisdictions (Uganda appears to be missing out on this debate since it is busy chasing Users) where the question as to where the tax value is created rather than where the taxes are paid is guiding the conversation.
The government must realise that in this global digital economy, social media users are playing a key role in generating value for digital companies and it is against these companies that it should seek most of the taxation and not the users.
Other governments around the world which are open to a more progressive outlook to these things, are pushing to rewrite their tax rules to capture tax from Technology Companies like Google, Facebook, Amazon etc which may have no representative offices, or other physical presence in a country, but are accruing profits through large numbers of online Users.
In the story carried in the Wall Street Journal of the 12th December 2017 under the title “Facebook to Give Countries a chance to Tax its profits from local Ads