Uganda’s parliament passed a tax on the incomes of foreign digital services providers operating in the country, joining a growing list of African countries seeking a share of revenue generated locally by technology companies.
The 5% levy on non-resident providers was passed on Tuesday (July 11) as part of a revision of the country’s income tax law that includes a new provision taxing some local loss-making companies. A post on the government’s Twitter account indicated the digital services tax was requested by Ugandan president Yoweri Museveni.
Henry Musasizi, Uganda’s minister of state for finance, said the tax is for the government to get a cut of what it helps to generate. “For Uber, the money goes to California; the man derives income, but pays no taxes. Now we are saying, can we have a mechanism of having the taxes?” he said.
The tax, should Museveni sign it into law, will capture notable U.S. companies like Facebook, Twitter, Amazon, and Netflix whose services are used by Uganda’s 12 million internet users in its net.
African government taxes on U.S. tech companies are not unique to Uganda. Nigeria intends to tax digital non-resident companies at 6% of turnover. Kenya has a 1.5% digital service tax on gross transaction value “payable on income derived or accrued in Kenya from services offered through a digital marketplace.”
In Uganda, social media has been a platform for citizens and opposition groups to organize campaigns and express dissent against the long-standing Museveni regime. In response, the government has often partially or totally shut down the internet, usually during elections like in January 2021. The committee behind the 5% tax said it is “not a social media tax.”
Opposition lawmakers in Uganda said the tax was not informed by evidence and could harm locals. “The Ministry of Finance did not provide us with anything… We are just on a fishing expedition trying to hunt out for taxes wherever they are with no adequate knowledge,” said Muhammad Nsereko, an independent lawmaker who represents a district in the capital Kampala.
The subject of whether and how to tax digital companies has long bothered (and split opinion) between OECD countries. A 2018 proposal by the EU to tax companies’ revenues in the countries they are generated — to reform the standard ‘permanent establishment’ rule — has not become law as the U.S. resists a global deal on taxing corporate giants.
New negotiations involving tax officials from 143 jurisdictions failed this week in Paris, the Wall Street Journal reports.
