East African Business Week (Kampala)
Edris Kisambira
11 October 2008
Kampala — A Makerere University economist has called on the Ugandan government to carry out an ICT sector tax reform, which, if implemented, is expected to spur the sector to new growth levels.
Dr. Edward Batte Sennoga said prevailing high taxes affect investment in several ways including a reduction in uptake of services by those using the services as well as prospective users.
Sennoga said the present tax policy leads to a reduction in direct investment by shareholders and a reduction in profit margins of ICT service providers as they strive not to pass on the tax to users.
"Reduced uptake of services and the subsequent decline in sector investment may result in falling government revenues," Sennoga said.
He made the remarks in a presentation titled 'Challenges and lessons of taxation policy on ICT services at a high level symposium that drew government, regulators and industry players.
A 2007 Deloitte study revealed that a cut in Uganda's excise duty from 12% to 8% on mobile services would lead to an increase in total tax receipts of up to 2.5% between 2007 and 2017 and an increase in GDP equivalent to 0.6 % between 2007 and 2017.
Sennoga said an ICT sector tax reform should see a rationalisation of taxes on ICT services and equipment.
"..., modest reductions in taxes on phone services have the potential to generate substantial gains in demand, airtime usage and penetration rates," Sennoga said.
He said the reform should take in a reduction of taxes on and/or exemption of software development, maintenance and upgrade costs and software license fees given these costs comprise the bulk of IT costs.
Sennoga said the government of Uganda should develop a greater understanding of e-business taxation and tariff issues and, create awareness of how these issues are being addressed in the region and internationally.
This he said would enable the tax authorities to establish a shared base of understanding of various tax and tariff issues leading to subsequent development of an 'e-business tax and tariff policy by government.
Participation in international dialogue and co-ordination of tax policies, he said is critical if Uganda wishes to avoid having different tax, import duties and tariffs affecting e-business.
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