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.
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).