We cannot deny that e-commerce has become a major player in retail over the past few years and this has generated enormous opportunities for the global economy.
These opportunities are in form of; new growth engines, trade modes, consumption trends, and jobs. According to research, e-commerce has been defined as the distribution, buying, selling, marketing and servicing of products or services over electronic systems such as the internet and other computing devices.
In Uganda, there has been an increase in the use of e-commerce by both consumers and businesses across the sectors of the economy including in basic trade, groceries and fresh produce through digital platforms such as Kikuubo online, Hellofood, Eyetrade, ZIDI, TakeawayUG, OLX, Ark organics, Minute5 and many others.
The impact of COVID-19 also greatly accelerated the landscape of how trade can be conducted and thus traditional businesses have had to adapt and participate in the digital economy through developing their own applications or subscribing to the available platforms to continue trading.
With this background, it now makes sense for everyone beginning their own venture to look at peers and businesses that have seen success from online trading to learn from them.
In Uganda, perhaps the most well-known success story of them all is Jumia. It is an undeniable force when it comes to e-commerce-selling everything from clothing to home accessories, food, drinks, appliances among other things.
Such progress is what most startup online companies prefer to emulate for easy access of their products to customers, quick monies but most importantly dodge the taxman. Mark Wadulo, the owner of the Mivaazo Clothing Ltd, an online shop that specializes in ladies’ dresses can confirm the convenience of e-commerce to his customers through ordinary posts on WhatsApp and Facebook.
His counterpart David Musoke will take some years now to walk to any market because through Home DUUKA, he gets his groceries delivered at his door step. Wadulo and Musoke’s experience with online business is a true reflection of how this trade is an influence in Uganda today.
Such lucrativeness is what has forced URA to develop a collaborative approach to harmonize the efficient collection of duties and taxes in the digital trade because Uganda is losing revenue annually in tax-free internet sales.
People are getting all wired with access to high-speed internet links and buying everything online. In the end, this is challenging the traditional approaches to taxation that were based on a physical presence as business activities are now shifting to an internet-enabled environment.
Why tax e-commerce in Uganda?
Uganda is one of the developing countries that have been advocating for legislative changes to cope with the current technological advancement. The government recognizes the potential of the digital economy in driving economic growth. It is in this regard that in 2006 & 2009, the Ministry of Information and Communications Technology and National Guidance and the National Information Technology Authority-Uganda (NITA-U) were established to provide oversight and an enabling environment for the ICT industry, including E-Commerce. These two bodies are also very valuable partners to URA in the taxation of E-Commerce.
Albert Mucunguzi, the Managing Director of PC Tech Uganda noted that out of the 35.9 million adult Ugandans, less than 10 million can access internet. And many of those who have access to internet would rather update their Facebook statuses than transact business.
It has also been observed that most e-commerce transaction payments in Uganda are done through mobile money rather than credit cards.
Statistics from Ministry of Information and Communication Technology (MOICT) show that Telephone subscriptions (mobile and fixed) stood at 20.63 Million active subscribers as of December 2014 compared to 18.34 million as of December 2013, the Number of mobile money subscriptions stood at 18.53 million in December 2014 compared to 14.24 million in December 2013, the value of mobile money transactions is over 13 trillion as at December 2014, the Internet subscribers rose from 3.6million in 2013 to 5.7million in 2014, the Internet subscribers rose from 7.3million in 2013 to 10.8million in 2014. All these indicators promise growth trend of e-commerce in Uganda.
Uganda has also continuously seen a drastic change in ICT which has led to an ICT savvy society. This can be observed through the certain salient features of technological advancement related to the introduction of computer linked communications such as; the increased use of internet and mobile phones which affected commercial relations that existed before.
Currently, there are 22 internet service providers (ISPs) in the country and there are around eight mobile network operators (MNOs) apart from electronic banking facilities offered by a variety of Micro-Deposit Taking Institutions (MDAs) and commercial banks linked with Automatic Teller Machines (ATMs). There is also growth of mobile money integrations that enable mobile phones to interface with customer bank accounts (mobile phone baking).
Is URA ready to tax?
URA has over the past decade undertaken digital transformation initiatives to harness the benefits of technology that would result in administrative efficiency and promote compliance. However, the speed of the changes caused by digitalization has had broad implications for the Ugandan tax system and poses challenges for tax policy and administration. To counter this, URA continues to enhance the capacity of its staff through collaboration with regional and global organizations such the Organization of Economic Cooperation and Development (OECD) and the African Tax Administration Forum (ATAF).
According to Robert Luvuma, the URA Manager International Taxation, URA is in discussions with the Ministry of Finance to agree on the appropriate policy options Uganda should take in order to maintain a balance between revenue and economic development.
“The model of operation for URA is a policy decision, so once the Ministry has approved, we act,” Luvuma said.
In a recent interview of Collin Babirukamu, the NITA-U Director e-government services, he has mixed feelings on taxing the digital economy now. He believes that while it is good for additional revenue and for the economy, there is a lot of integration that must be done among government institutions to improve service delivery and eventually compliance.
Babirukamu’s views are not different from Ron Kawamara, the CEO Jumia Uganda. Kawamara believes all companies should pay a fair share because other online platforms live Glovo and Jumia are paying taxes fully through EFRIS.
“URA should focus on the big multinationals like Facebook, YouTube, Google and Amazon and fully integrate them because we advertise with them and pay huge sums in dollars yet they are paying zero taxes to Uganda,” Kawamara advised.
On the other hand, Peter Makubuya, a young consultant in Kampala thinks URA is not ready especially if they are also thinking of taxing data.
“I look at taxing data as frustrating Ugandans because you cannot differentiate data I have bought for purposes of academics and that of business. So rather than concentrate on that little deduction from data, how about devise means on taxing the profit I have earned from using data,” Makubuya contemplated.