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[Guest Post] Are Telecoms paying the rightful tax?

My views on the proposed tax on social media. By Hon. Edward Kafufu Baliddawa (Former MP Kigulu North and former Chairman ICT Committee)

I am not yet aware of the technological mechanism that Uganda Revenue Authority (URA) will use in order to be able to collect the proposed tax on social media. Of course in order for this proposal to have life, there will be need to give it a legal basis.

However, I have always for a very long time argued and those colleagues who have served on the Parliamentary Committee on ICT will bear me witness on this. My contention is that even before we go for the taxing of social media usage, government should be collecting more taxes from the Telecom Companies. My argument has been that it’s not yet comprehensible that Uganda Revenue Authority (URA) up to date has not actualised the deployment of an Intelligence Network (IN) that would be able to let URA know precisely how much each of the Telecoms earn on a daily basis in terms of voice, data, Mobile Money, Interconnections, Co-hosting, Leased lines and hire of other infrastructure like the communication towers.

This is something we tried for over five years to emphasize for enforcement by Uganda Communications Commission (UCC) the regulator, but all fell on deaf ears. It is so sad that people in government and the regulator inclusive, can collude with the private telecoms to thwart the implementation of a mechanism that would have otherwise fetched far more money in terms of taxes to government coffers.

It is no longer a secret at all that these telecoms actually declare far much less revenue to URA than what they earn. As it is now, URA depends on the self declared total revenue by each telecom in order to calculate the tax due to URA.

So, in my view, even before one proceeds to tax social media, we should work on collecting all that is actually due to us.

As I said, for many years, I have been arguing that there is lot of money due to us as government of Uganda in form of taxes but which we have not collected from the telecoms due to what I would conclude to be simply collusion with the industry regulator and tax authorities.

Let us have a quick look at the potential earnings of these Telecoms;

According to the 2016/17 Annual Communications Sector report released by the Uganda Communications Commission (UCC), Uganda’s mobile phone subscriber base stood at 23.6 million subscribers as of June 2017. However, a report by Jumia places the figure currently at 30 million subscribers. We shall stick to the UCC statistics for now. For our calculation, let us assume that each subscriber uses at least Shs. 1,000 in airtime for voice each day.What would the calculation be like?

Each single day, the telecoms would earn a cool Shs. 23.6 Billion, making it Shs. 708 Billion monthly and annually the figure works out at Shs 8.496 Trillion. This is just Voice only.

Now, can we ask URA if this is the total gross revenue that they are using to tax these telecoms?

The story doesn’t end here. These telecoms’ other major source of revenue is data which includes data bundles we use in order to access our social media and the Internet for mail and Web surfing. The UCC report once again states that there are 13.55 million internet subscriptions. If we just assume that each of these subscribers, use only 500 shillings each day on average for data. The end result is a daily revenue of UGX Shs. 6.778 Billion daily just from data. A month yields UGX Shs 203.25 Billion while a year sees them earning UGX Shs. 2.44 Trillion.

Adding just these two service offerings yields gross revenues of UGX Shs 10.9 Trillion annually. Let us assume taxes took only 15% of this sum, that would imply that the Telecoms alone would contribute UGX 1.6 Trillion to the taxman annually. Compare this with the overall communications sector contribution of UGX 523.1 Billion for the year 2016/17. Who is fooling who?

Now friends, the above estimated earning is from just two services, thus Voice and Data. But we need to get to factor in the most lucrative sector product, the Mobile Money on which the telecoms earn “madly” and which is a continuous source of envy for the Banks. Factor in miscellaneous services like caller tunes, ring tones, cloud services, you shudder to imagine how much potential tax revenue isn’t declared.

So, I hope that you can now see why being able to collect every penny that is due to us from these telecoms would be a better move of picking the “low hanging fruits” for URA than thinking of going after the social media.

In conclusion, as I do support the President’s proposal for taxing the social media in order for government to raise enough taxes to fund the many government programs for improved service delivery, I do once again urge the Ministry of ICT in conjunction with UCC the telecoms regulator and URA to operationalize the installation of the Intelligence Network (IN) so that we can get what accrues to us as a country. Let us do first things first.

I think that these telecoms earn something close if not more than 5trn shillings each year from the Mobile Money transactions plus all the other services they offer minus data and voice.

This means that each year a total sum of about 16 Trillion shillings is grossed in combined revenue by the telecoms.

First things first, let us have the right tax being paid by those perceived to be avoiding taxation.

Hon. Edward Baliddawa Kafufu

FMR MP Kigulu North

Email: edward.baliddawa [at] gmail.com

Twitter: @ebaliddawa

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