On Tuesday, Uganda’s parliament made a significant move by passing a new tax law that enforces a 5% levy on the income generated within the country by foreign digital communications service providers. This includes prominent platforms like Twitter and Meta’s Facebook.
The legislative body, as confirmed through a Twitter post, referred to the newly passed law as “The Income Tax (Amendment) Bill, 2023,” which encompasses the introduction of this levy. With this decision, Uganda aims to regulate and generate revenue from the operations of foreign digital service providers within its jurisdiction.
According to the bill, digital services are broadly defined to include various categories. These encompass online advertising services, data services, services provided through online marketplaces or intermediation platforms (such as accommodation, vehicle-hire, and transport marketplaces), digital content services involving accessing and downloading digital content, online gaming services, cloud computing services, data warehousing, services delivered through social media platforms or internet search engines, and any other digital services that may be specified by the Minister of Finance through a statutory instrument under the Income Tax Act Cap 34.
The recently passed law also extends taxation to non-resident providers of digital services in Uganda, including major platforms like Amazon, and Netflix, according to the parliament’s statement. However, the bill has raised concerns among certain groups, including opposition lawmakers and rights advocates.
They argue that the implementation of this levy may lead social media companies to find ways to charge Ugandans for services that are currently accessible for free. Critics further contend that the tax is a deliberate attempt to restrict access to social media platforms and curtail freedom of speech, particularly considering the government’s perceived hostility towards these platforms.