Uganda’s controversial social media tax is failing to hit its financial targets and one of the main reasons is the spike in use of VPNs across the country.
Regular readers will recall that we reported earlier this year on plans from the Ugandan government to tax social media use in the country.
What is the social media tax?
The justification for the tax was simple protectionism. The Ugandan government claimed that the use of overseas social media sites was taking money out of the country and also stymying online innovation in Uganda.
The real reason was a desire to try and restrict access to sites which are often used by opponents of Ugandan President Yoweri Museveni to organise themselves, share information, and campaign against his authoritarian regime.
Many people also suggested that it was a blatant money-making exercise as the beneficiaries of the new tax were not innovative internet developers, but the Government itself.
This argument seems to be supported by the fact that the Uganda Revenue Authority (URA) had a target for the amount of money they hoped to raise from the social media tax.
The social media tax was set at a rate of 200 Ugandan Shillings per day. This is approximately 5 US cents or around 3 pence in the UK. The URA expected to benefit to the tune of about 24.9 billion Ugandan Shillings (US$6.6 million) each quarter.
However, the actual amount raised in the last quarter to September of this year was just 20.5 billion Ugandan Shillings (US$5.4 million), around 20% less than expected.
What is most interesting about this shortfall is the reasons suggested by the URA for it. As expected, some people have been forced to cut the amount of time they are spending on social media sites.
That is because, although the tax seems very low, given that around 80% of the population earn less that US$1 a day, it is actually a sizable chunk of their income. Many simply cannot afford to pay that amount every day.
But the other big factor reported by the URA was a spike in VPN use.
VPNs saving Ugandan internet users money
The URA public and corporate affairs manager, Ian Rumanyika, admitted to the East African that VPNs were the biggest factor in the tax failing to meet expected income levels.
“One of the reasons (OTT) has not been performing well is resistance. We experienced a lot of resistance in the first quarter thus failing on our targets,” he explained.
He was then asked about Uganda’s effort to block the use of VPNs. As regular readers may recall, when internet users began mocking the government for the social media tax and saying they would just use VPNs, the Government pledged to block them all.
This claim brought just as much ridicule because if even a Government with the financial power of China cannot block VPNs, how on earth was Uganda’s going to do it?
Of course, they have not managed to, and Mr. Rumanyika all but admitted they were unlike to manage it. “We cannot tell how many Ugandans are using VPNs because we do not know where or who is using it,” he admitted. “We continuously block them but more keep coming up.”
VPN use essential for free internet access in Uganda
He finished his comments with the rather curious claim that “It is catching up because they [subscribers] cannot use VPNs forever,” he said.
Of course, this totally wrong. Ugandan internet users can and will use VPNs for as long as the Museveni regime continues to restrict their free access to the internet and enforce a wildly unpopular and unnecessary tax on social media.
There is no sign of the Government changing its stance. Museveni himself has pledged that the tax is here to stay and described social media as ‘a luxury item’.
But it has had a hugely negative impact. As well as restricting access to information and the internet, it has also damaged the Ugandan economy. While the tax itself has raised revenue, it has also affected revenues for Uganda’s state-run telecoms companies.
Meanwhile, the social media sites themselves have also condemned the tax, with Facebook among the most vocal. They have threatened to withdraw investment from Uganda unless the tax is scrapped.
Given the low incomes in Uganda, many internet users will be turning to free VPNs to get around the tax. This may seem logical, but people should be aware of the very real privacy and security risks that come with all free VPN services.
There are ways to make access to premium VPNs more affordable in Uganda. For example, IPVanish has recently increased the number of simultaneous connections allowed with each account to ten.
This means that ten Ugandan’s could club together for a single subscription and all use the service for just 84 Ugandan Shillings a day. This is less than half the price of the social media tax and, as well as avoiding that, they could enjoy all the other benefits that come with a premium VPN.
Uganda’s social media looks to be here to stay, but it is clear that thanks to VPNs, Ugandan internet users are not taking it lying down.