Uganda Revenue Authority (URA) Commissioner General Doris Akol has
proposed plans to drop the current Over the Top Tax (OTT) and instead impose a
direct tax on mobile data.
Akol presented the proposal while appearing before Parliament’s Finance
Committee over the coming financial year 2020/2021 Budget Framework Paper.
Without providing details, Akol underscored the need to have the
tax policy reviewed since it was not performing well.
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Her proposal attracted attention from several committee members demanding for
further explanation but the Finance Committee Chairperson Henry Musasizi
directed that Akol reappears on Tuesday next week alongside the Minister of
Finance and Secretary to Treasury Keith Muhakanizi to explain the proposal
further.
In July 2019, the tax body reported a collection of only Shillings 49.5 billion
out of the targeted 284 billion from OTT. This meant that URA was unable to
collect 234 billion from this tax measure, a shortfall of 83 per cent from the
estimates.
According to the URA, many Ugandans resorted to using Virtual Private Networks
(VPN) and wireless networks in their offices to avoid paying the tax. For OTT,
every Ugandan using social media platforms like Facebook, and WhatsApp was
expected to pay 200 Shillings daily.
The OTT was controversial from its introduction inspiring sections of the
public led by Kyadondo East MP Robert Kyagulanyi also known as Bobi Wine to
take to the streets to demonstrate against the tax.
Besides the proposed policy shift on OTT, Akol also suggested other changes
including the need for government to selectively provide incentives to
investments whose social and economic benefits or contributions are
significant. She said that this is to reduce unnecessary incentives and
exemptions since they contribute to narrowing the tax base.
“Amend tax procedure Act to allow instalment of payments of taxes over a
financial year period to ease tax payments and revenue mobilisation,” she
added.
The Commissioner-General also proposed to lower presumptive tax rates to bring
as many small businesses into the tax bracket that can later be upgraded into
higher bands. She says that this will allow further and systematic penetration
into the informal sector.
URA also wants government to abolish some non-tax charges on some government
services like verifying land titles, renewing passports and driving permits in
order to address the tax morale issue in the country.
The tax body also wants changes in the law to mandate individuals to file their
income tax returns so that to improve URA’s tax register.
Government intends to collect Shillings 21.54 trillion in domestic revenue in
the coming 2020/2021 financial year to finance the proposed Shillings 39.64
trillion election-year budget. This is slightly lower than the Shillings 40.48
trillion, budget for this financial year.
According to the Budget framework paper accessed by URN, the Finance Ministry
has set a new revenue target of Shillings 21.54 trillion up from Shillings 20.4
trillion in the current financial year and according to the projections,
Shillings 20.040 trillion will come from tax revenue while Shillings 1.505
trillion will come from Non-Tax Revenue (NTR).
