macroafricaintel | Tax social media at your peril

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

African countries have low tax bases not necessarily because their authorities do not desire the revenue but often due to the cost of acquiring it. With significant portions of their populations in the informal economy, there are not many options available to tax authorities to assess income. More financial inclusion should make their jobs easier over time. But what about now? The ubiquity of mobile phones, smartphones especially, and the proliferation of social media, could be a less expensive means by which to assess how much people earn. Oftentimes, it is not that citizens do not wish to pay tax. But dealing with public institutions in most African countries is not only sometimes frustrating but potentially punitive.

Authorities are better off just taxing their citizens’ consumption. Value-added tax (VAT) tends to be an effective tool in this regard. In some African countries, the telecommunication sector tends to be either exempt from VAT or allowed concessionary rates to engender digital inclusion. Considering how endeared many are to their mobile phones, any measure that makes it more expensive to use them could be politically costly, however. When Nigeria, a country where there is extreme sensitivity to any measure that could potentially stifle internet freedom, first flirted with the idea of a “communication services tax”, the uproar was deafening. But with almost $800 million in potential annual revenue, it was too tempting a proposition for the authorities. Some African authorities are not as encumbered. At least, so it seemed at first.

In March, Uganda announced a so-called social media tax. Not that the authorities did not already tax voice and data communications. But they did not tax data usage as much as they did phone calls. Planned for July, data usage on social media platforms like Facebook, Twitter, WhatsApp, Skype and Viber would be taxed more; according to the proposal then. The move was motivated in part because of the authorities’ strained finances, it seems. Volatile and hitherto low commodity prices are one of the reasons why. Burgeoning debt stocks and disproportionate portions of revenue used to service them, are another. Consequently, African tax authorities have little choice to but to seek new ways to raise more revenue.

Touching a nerve
Many African authorities have been looking to tax the purchase of data for internet use by their citizens more heavily for a while now. The potential revenue figures are eye-watering certainly. But there is another motivation, it is believed. Some African authorities, increasingly irritated by criticisms on the internet, might not mind that the social media habits of their citizens be a little bit more expensive. Take the Ugandan example; President Yoweri Museveni was not shy about his desire to make gossip via social media a very dear endeavour via the new digital taxes he mooted. Not that the authorities do not already assert some form of control over social media and other forms of internet usage. Like China, African authorities are becoming adept at switching off the internet, making it slow, or restricting its usage, during crucial politically sensitive events like elections, protests and so on.

But higher taxation on internet usage could be a more effective and less expensive way to do that for the authorities with such aims. Since if the habit weighs on the purse, people are likely to choose the words they publish on social media more carefully of their own volition. Public opinion would definitely be stifled as a result. But there is also the possiblity that the proliferation of fake news might reduce. Perhaps then, it is only a matter of time before other African countries begin to flirt with Mr Museveni’s idea. Even so, there are limits to how far the authorities can push the envelope. Because unlike the quasi-dictatorships cloaked in democratic garments in countries like Uganda and Rwanda, some African leaders, especially those with crucial elections to win, can ill-afford to alienate citizens.

Turns out Mr Museveni is not totally insensitive to public opinion: he has shelved the planned social media tax. In fact, his government now says no such proposal was ever made: “There is nothing like social media tax. There is no such proposal. That is not what the president proposed. No one will tax you for using WhatsApp and Facebook”, says Ugandan information minister Frank Tumwebaze. Is Mr Museveni’s counterpart in Tanzania, John Magufuli, who recently ordered that bloggers pay a $930 fee to legally do what is ideally free, likely to be similarly sensitive? No matter. He will fail.

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