The Minister of State for Finance -General Duties), Henry Musasizi, has defended a government proposal to impose a 5 percent tax on the gross income earned by international digital companies in Uganda.
Musasizi together with other officials from the Ministry of Finance was appearing before Parliament’s Finance Committee on Thursday to defend different proposals in seven tax Bills intended to raise revenue to finance the national budget for the next financial year 2023/2024.
The tax Bills include; the Excise Duty (Amendment) Bill, 2023, the Traffic and Road Safety (Amendment) Bill 2023, the Tax Procedures Code (Amendment) Bill 2023, the Income Tax (Amendment) Bill 2023, the Automatic Exchange of Information Bill 2023, the Value Added Tax (Amendment) Bill 2023 and the Lotteries and Gaming Bill 2023.
Under the Income Tax (Amendment) Bill, the government seeks to impose a tax on non-residents providing digital services in the country by imposing a tax at the rate of 5 percent on every non-resident person deriving income from providing digital services in Uganda to a customer in Uganda.
The digital companies eligible of paying this tax include companies whose income is derived from providing a digital service in Uganda through the internet, electronic network, or an online platform.
Karim Masaba, the Mbale Industrial Division MP questioned how the proposed tax will be implemented.
He recounted that a tax on Netflix was introduced in Canada and that the only way they could charge the tax was to charge payments made. He however said that Netflix pushed the charge on the consumers.
Basil Bataringaya, the Kashari North MP wondered if taxing the companies will not result in companies charging Ugandans for social media services and also increase the costs of adverts.
Tracy Akello, the Rulings and Interpretations Business Policy Supervisor at Uganda Revenue Authority (URA), revealed that the tax will not have to be paid by Ugandans but by non-resident digital companies.
Akello said that this is a charging system that will require digital companies to account for the income sourced in Uganda.
She explained that URA intends to tax Amazon, Netflix, Twitter, and Facebook, as long as they are sourcing income from Uganda.
John Musinguzi, the URA Commissioner General said that they have put up a provision for international digital companies to file their returns online and that this will be done on a quarterly basis.
He revealed that they have already started collecting VAT, and now they are proposing to collect income tax.