4 July 2018

Uganda: 'Social Media Tax' Not the Smartest Way to Skin a Cat

Photo: Nairobi News
(file photo)
opinion

The controversial "social media tax" came into effect on July 1, and some very strong feelings about it have been vented on, well, social media.

Those who oppose it, do so from three broad points. First, some of them see it is an absurd double tax on a nascent digital economy.

Secondly, several people seem fine with the general idea of paying the tax, but oppose it vehemently because they say a predatory corrupt government will simply steal the additional revenue.

Which is why, although solutions to beat detection by using virtual private network (VPN) apps might actually cost more than the Shs200 per day tax they now have to pay, they think it is worthwhile "on principle".

A third segment sees it as a crude attack on freedom of expression.

The Kampala government is desperate for any money it can lay its hands on, so we should expect that it will stay the course on the "social media tax" for a while. It might raise additional revenue, though it will unlikely get the additional Shs400 billion it is hoping for.

More worthwhile to explore is whether there will be a net positive outcome. During the chaotic 2016 election, when the government blocked access to social media, Uganda recorded the highest number of VPN downloads anywhere in the world in a single day.

Some tech trend analysts have, therefore, projected that Uganda could be a hotbed of one of the largest anonymisation movements in the world as the people find ever more ways to get on social media without detection, and the government races to try and foil them.

Already, noises and threats have been made about banning VPN. But there are really several other - and cheaper - ways to be "anonymous" online, so this will probably be a losing fight. One can foresee all those innovators working on anonymisation finding an easy testing ground in Uganda.

In more practical terms, though, we can forecast what is likely to happen from history. For that, one good place to look is 2000 when mobile phone usage became mainstream in Uganda, as ever smaller shilling units of airtime cards were introduced.

By 2002, we were in the throes of disruption. By that point we could sense in the media industry that the growth of digital "economy" was going to hit us hard. Newspaper circulation growth had slowed painfully, and we basically abandoned the optimistic projections that we had built up in 1997.

I remember a particularly gloomy board meeting in early 2002. It was gloomy, that is, until then board chair Martin Aliker walked in. We were all going on about how expenditure on mobile phones, and particularly airtime, had taken away budgets for newspaper purchases.

Aliker listened, then chipped in. He was then also board chair of Uganda Breweries, and a handful of other companies. He said it was the same story. At all those companies, managers were mourning about how expenditure on air time had eaten into the spend customers used to allocate to their products, so it was a shared misery.

As companies like MTN rose to be among the largest in the country, and leading taxpayers, clearly the arrival of the mobile phone had created new tax revenue opportunities. But it was also evident that overall, because other industries on which people used to spend air time money shrank, the overall tax take increased less than it should have if there had been continued growth all round.

We are likely to see the same with the "social media tax". There's probably not a single mobile phone user who starting from Monday, earned an additional Sh200 a day. For those who will pay it, it means they will spend Sh1,400 less a week on something else. Maybe a weekend newspaper, beer, milk, bread, or whatever.

You need specific skills to govern for these times. In countries like Kenya, where there is a more sophisticated understanding of how the digital economy works, one sees how you can create opportunities where people are put in a situation where they must spend both on airtime/bundles and a new service.

It created an E-citizen platform. If you want to get a new identity card, renew your driving licence, a new work permit, a new passport, the only way you can do it is by applying for it online, and paying via mobile money.

There is no resentment that you are being double taxed, and you get the incentive of convenience. From home you apply, send mobile money, and a pop-up licence renewal comes up and you print. People see this as an investment, and will find the extra expenditure for it.

The telcos and ISP providers get a surge of business from it, and the Kenya Revenue Authority gets its cut off the top. There are many ways Kampala can grow the tax pie with less acrimony.

Mr Onyango-Obbo is the publisher of Africa data visualiser Africapedia.com and explainer site Roguechiefs.com. Twitter@cobbo3

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