A Model for Improving Social Media Tax Compliance in Uganda

Abstract

When the social media tax was introduced in Uganda in June 2018, a case was filed in the Constitutional Court seeking the nullification of the tax. A campaign hashtag “#ThisTaxMustGo” was created against the tax. Social media users began using Virtual Private Network (VPN) Apps installed on their smartphones to evade the tax. One year after its introduction, the Uganda Revenue Authority (URA) acknowledged that the social media tax was among the worst-performing tax categories for 2018/19. Only UGX 49.5 billion was collected in 2019, against the projected UGX 284 billion, hence a 17.4% performance. URA observed that there was a need for a deeper study of social media tax to find ways of improving its compliance. This chapter surveyed the social media tax compliance levels and investigated ways of improving compliance with the social media tax among the taxpayers in Uganda. A survey was conducted in Mbale municipality, where a total of 381 closed-ended questions with ordered choices were given out within the municipality, and 325 were filled out and returned for analysis. Statistical Package for the Social Science (SPSS) and Excel were used to analyse quantitative data. The results of the survey revealed that 40% of social media users did not pay the social media tax whenever they wanted to access social media, while 58% of those who did not pay the tax used VPN to evade the social media tax. About 67% said the social media tax was very high, while 75% said the tax was unfair and 68% said the introduction of the social media tax was an attempt to reduce freedom of expression. This chapter presents a modified model for improving social media tax compliance in Uganda. It is hoped that this model may be of great use to the Uganda Revenue Authority and other revenue bodies in developing countries seeking to improve tax compliance.