The Ugandan government through the Ministry of Finance is set to introduce a digital service tax on subscription-based video and audio content providers operating within its jurisdiction like Netflix, HBO, Disney+, iTunes, Spotify, and the like.
This comes in the wake of the government seeking to widen its tax base and the increased subscriptions to such services by elite urban dwellers is one area that has been identified. It is alleged that these services take advantage of international agreements to operate in jurisdictions where they’re not incorporated without paying a dime.
How will the government charge the digital service tax?
A one Moses Kaggwa who doubles as the Director of Economic Affairs in the Ministry of Finance is quoted to have said that they would like to work together with the affected companies to ascertain the revenue collected from Uganda so as to come up with a tax that will see government widen its tax base according to NilePost.
“We can amalgamate or match the transactions that have been done in the country or together with their value and we tax that based on the gross. We can have a tax linked to gross revenue from Uganda but we need a corporation,” Kaggwa said.
This will be the second time the government is targeting over the top services with the first to fall prey being social networking and communication services like WhatsApp, Facebook, Twitter among others with the infamous OTT tax. Subscription services like Netflix now join this list albeit with a different collection mechanism.
Also Read:
- OTT subscriptions increase to 11.3 million
- ICT Minister: If OTT can be removed the better
- Poll: Is the OTT Tax beneficial after all?
The likely difference between the digital service and OTT taxes is that the latter is direct and charged to the end-user, whereas the former is poised to be charged on earnings by the affected companies. However, if successful, these companies could pass on the tax to the end-users in terms of increments in subscription fees.
It is for this reason that the proposal has been met with some backlash with online users charging towards the government questioning how big of a user base do such services have in Uganda to justify the tax.
