Uganda Raises Much-needed Revenue with New Tax on Foreign Digital Companies.


Uganda’s parliament has approved the imposition of a 5% levy on the revenues earned by foreign digital companies, including Facebook (Meta), Twitter, Amazon, and Netflix. The move aims to generate tax revenue from these companies for their operations in the country. Failure to comply with the tax requirement will result in severe penalties.

The proposal for the Tax Amendment Bills, 2023 was presented to parliament by Uganda’s Minister of Finance, Matia Kasaija, earlier this year. Among the proposed amendments was the introduction of a levy on the income of foreign digital companies.

This measure aligns with the efforts of East African countries to tap into the rapidly growing digital economy and generate internally-generated revenue to address long-standing public debt. The Ugandan parliament confirmed the approval of a new tax law, “The Income Tax (Amendment) Bill, 2023,” which includes the provision for the new levy.

As expected, the bill has generated commentary, criticism, and opposition from opposition lawmakers, human rights advocates, and critics who argue that it could have severe implications. One concern raised is that Ugandans may end up being charged for services that were previously free on some social media platforms.

Critics believe that the levy is a means to restrict access to social media and suppress free speech in a government that is hostile towards such platforms. President Yoweri Museveni, who has been in power since 1986, has been critical of social media, claiming it is often used to spread rumors.

However, the parliament clarified that the levy is not a social media tax and will not affect ordinary Ugandans in any way. The new law will also tax non-resident providers of digital services in Uganda, including Facebook, Twitter, Amazon, and Netflix.

Uganda joins a group of African countries, including Nigeria, Zimbabwe, Tunisia, Tanzania, Sierra Leone, and Kenya, that have imposed various forms of taxes on digital services provided by non-resident companies.

The bill proposes the imposition of a final income tax of 5% on non-resident individuals or companies earning income from the provision of digital services to customers in Uganda. The bill defines digital services to include online advertising, data services, services provided through online marketplaces, digital content services, online gaming services, cloud computing services, and other services delivered through social media platforms or internet search engines.

While the long-term implications of this tax on foreign digital companies remain to be seen, other African countries that have implemented similar measures have witnessed an improvement in their internally generated revenue. Critics who oppose the tax imposition in Uganda are now considering how it could help the country address its significant debt burden



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