Opinion: Digital Tax In Uganda: A boost Or Barrier To Digitization Drive?

Opinion: Digital Tax In Uganda: A boost Or Barrier To Digitization Drive?

By Joviah Nalunkuuma 

As Uganda aims to accelerate its digitisation efforts, the implementation of a digital tax has sparked a debate on whether it will help or hinder the country’s progress. While some argue that it could discourage online entrepreneurship and hinder digital inclusion, others believe it is a necessary step to ensure fairness and generate revenue for national development.

In a recent appearance on NBS TV’s Morning Breeze, Director of Refactory at Clarke Intern Michael Niyitegeka emphasized the importance of developing a strategy, “Encourage more people to embrace digital platforms for production rather than just consumption.”

He said many individuals using these platforms are seeking alternative sources of income due to limited employment opportunities.

“There is need to view digital tools as essential factors of production rather than luxury items, urging Uganda to align with the global trend of digital taxation,” Niyitegeka said.

On the other hand, Assistant Commissioner of Public and Corporate Affairs at the Uganda Revenue Authority (URA)Ibrahim Bbossa, defended the implementation of the digital service tax.

He argued, “Tax aims to create a level playing field for businesses operating in the online space and contribute to national development.”

With a 5% tax on gross income, the government expects taxpayers to voluntarily comply by assessing their earnings, filing returns, and paying the applicable taxes.

Bbossa said “Uganda already has a value-added tax system in place, generating significant revenue from businesses, and the introduction of the automatic exchange of information convention enhances tax-related data sharing with global tax administrators.”

While proponents argue that it will ensure fairness and generate revenue, critics express concerns about potential discouragement of online entrepreneurship and limited access to digital tools for production. As Uganda navigates this complex landscape, finding the right balance between taxation and fostering digital inclusion will be crucial for the country’s long-term digitization success.

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