Uganda to go ahead with new tech tax

Uganda to go ahead with new tech tax

Uganda has reversed a parliamentary decision to abandon a new tax law that imposes a 5% levy on income earned locally by foreign companies. The tax law had been debated and dropped in May. However, President Yoweri Museveni has now signed a bill that includes the levy clause.

This means foreign-owned tech companies such as Netflix, Twitter, Facebook, Google, Amazon, and Uber offering services in Uganda will pay 5% of their income to the government.

As a number of media outlets point out, tech firms that don’t have headquarters on the continent pay only modest taxes to African nations. Uber, with a healthy local income, is one example noted by Uganda’s finance minister.

In addition, billions of dollars are generated from the data of close to 600 million African internet users. Such points are seen a justification for this and other taxes. In fact Nigeria, Kenya, and Tanzania have implemented similar levies on digital services.

Things aren’t aways so clear-cut, however. Local press suggests the Ugandan opposition fears that companies could push the costs of taxes onto locals that rely on digital platforms. That was one reason why the Nigerian government recently confirmed that it would not impose a 5% excise duty on Nigeria’s telecoms sector. The Minister of Communications and Digital Economy, Isa Pantami, had suggested that this move would increase the cost of telecommunication services.

Similarly some forms of tech tax can be seen as penalising content-creating citizens. Kenya, for example, is facing protests after proposing a 15% tax on content creators many of whom have taken to digital platforms to voice their frustrations with a proposal in the Finance Bill 2023.

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