Disconnecting the Connected: How Regulatory and tax treatment of Over-the-Top-Services in Africa creates barriers for Internet access

Mozilla and The African Union Commission (AUC) released a new study examining the misconceptions, challenges and real life impact of additional taxes on Over the Top Services (OTTs) imposed by governments across the African continent. ​The ​Regulatory Treatment of OTTs in Africa study found that these taxation regimes – often imposed without public consultation and impact assessments – have increased barriers to access, pushed people offline, and limited access to information, and access to services. The study conducted the analysis based on the available evidence and a select number of case studies.

“We’ve seen new taxable internet users during the last two years leave millions of people struggling to deal with the costs of getting and staying online,” ​said Alice Munyua, Policy Advisor.

“These regressive regulatory measures are taking place as governments rush to introduce digital transformation initiatives, and instead of focusing on how to connect more people to the internet, the region is building barriers that keep them off it.”​

The study examined the 2018 Ugandan government excise duties which included a mobile money tax of 1% on the transaction value of payments, transfers and withdrawals increasing mobile money fees from 10% to 15% and a new levy on more than 60 online platforms, including Facebook, WhatsApp, and Twitter that amounted to 200 Ugandan Shillings ($0.05) per day. The impact of these new taxes was immediate. The impact was immediate: the estimated number of internet users in Uganda dropped by nearly 30% between March and September 2018. But the impact is far wider than just the number of lost internet users. An initial estimate in August 2018 was that Uganda had forgone 2.8% in economic growth and 400 billion Ugandan shillings in taxes.

These types of sector-specific taxes pose a considerable threat to internet access and affordability for all users, but especially low income and marginalised people. Internet costs in Uganda are already prohibitively high. Uganda’s gross domestic product (GDP) per capita per day, is currently at 7,000 Ugandan shillings ($1.90), and many live off less. Paying 1,000 Ugandan shillings per day for internet data of 50 megabytes and an additional 200 shillings tax, is a major challenge. 200 Ugandan shillings ($0.05), is a kilogram of maize in Uganda.

The study further dives into the misconceptions that have contributed to the rise of these types of taxes across the region. The fundamental misunderstanding of the impact of social media on the Internet value chain, and the lack of a clear definition of OTTs has made evidence-based discussions about the impact of OTTs difficult. As a result of these misconceptions, regulatory interventions have used unsuitable tools and have been carried out by the organisations not fit for implementation.

The just concluded third Specialized Technical Committee on Communication and Information Technologies (STC-CICT) in Sharm-el-Sheikh, Egypt, called for the AUC to “develop guidelines on privacy and Over The Top Services (OTTs), and submit guidelines to the fourth STC-CICT in 2021” said Moctar Yedaly, Head of Information Society Division at the African Union Commission. “​This study is a good starting point for understanding the nuances of the impact of OTTs on the ICT ecosystem in the region. We hope it will lead to regional discussions that would consider more productive digital taxation models, appropriate policies and regulatory frameworks.”

Finally, the study proposes best practices to help Governments create an efficient taxation system while balancing the opposing objectives of collecting taxes, and economic growth, job creation and inclusion of the poor into the information society.

Mozilla and the African Union Commission will continue to engage and support regional discussions, including policy and regulatory efforts, in line with the “Specialized Technical Committee on Communications and Information Technologies (STC-CICT) 3, 2019 declaration,​ ​which calls on the AUC to ​“develop guidelines on Privacy and Over The Top Services in collaboration with relevant institutions and submit the guidelines to the STC-CICT 4 in 2021”.

Source: Mozilla