Telecoms start collecting social media and mobile money taxes

Two or so weeks ago, Matia Kasaija, the minister of finance, read the government’s budget for this financial year, which started today. Later, as one of the 9pm TV news bulletins went over the event, one of the older people in my household said something interesting. In “those days”, she said, what the public knew as the budget was the tax measures announced; new taxes, what rates were being increased or lowered – that kind of thing.

This time, Mr Kasaija did not announce those measures. All he said was that Parliament had reviewed and approved some tax measures, and introduced “modest adjustments in tax rates meant to generate revenue and also keeping some taxes in consonance with inflation.”

Maybe the minister was aware of how controversial and irrational some of those new measures were? Or, like this website was told by a tax advisor with one of the big accounting firms, while the measures had been debated and passed, they were still not yet approved by the executive.

The new measures, which went into effect on Sunday, include a 1% charge on every mobile money transaction and a Shs200 daily levy for the use of social media. These were passed by the parliament on 30 May. Since then, there has been little word from the executive about whether they’d indeed be implemented and how this will be done.

But in notices shared by telecoms at the end of last week, the daily levy for the use of social media – the so-called ‘over-the-top tax’ – will be paid through mobile money. On midnight, 1 July, mobile internet was inaccessible until the tax had been paid. As a result, the OTT tax dominated online conversations the following day.

The OTT tax has its roots in President Museveni’s distaste for social media, as expressed in a 12 March letter to the finance ministry. In the letter, Mr Museveni said the ministry was displaying “total lack of seriousness” in the identification and collection of taxes, and wondered why there was no tax on “olugambo(gossip) on social media (opinions, prejudices, insults ,friendly chats) and advertisements by Google and I do not know who else”. Thus, a new tax measure was added to the government’s list for the next financial year.

It’s the mobile money levy, though, that is completely baffling. Study after study has extolled the payment platform for increasing financial inclusion in under-developed economies like Uganda. The Bank of Uganda, no less, has gone on and on about this, too. But these views were also pushed to the side to ostensibly realise more government revenue.

It’s very apparent why the government targeted mobile money; it has interwoven into the daily fabric of Ugandan life. Every utility accepts mobile money payments, which are more convenient than lining up in banks. It is the preffered method for remittances. As such, a ridiculously expensive, ubiquitous levy would have to be paid by just about everyone.

Of course there could be amendments, especially given the uproar that has been raised on social media. But in case that doesn’t happen, it portends an interesting future for mobile money. Will payments move away from the platform to bank apps – many of which support the same services as mobile money? Shall we see more people using bank agents? Or will they continue as before, ridiculous charges and all?

The social media tax? That looks like it is here to stay.