Amid the global rise of giants like Amazon, Facebook, and Netflix, digital service imports have significantly increased in Africa in recent years. And African governments intend to surf that wave.

Last week, the Ugandan government revived a project for imposing a 5% tax on the revenues of non-resident digital companies that offer digital services in the country. Henri Musasizi, the Minister of Finance and Development, defended the project on July 4, in front of the Parliamentary Finance Commission.

"I recommend that you approve Article 16 of the Income Tax Amendment Bill, 2023, to allow the imposition of a tax on revenues earned by non-residents from the provision of digital services in Uganda," Minister Musasizi told the deputies.

"We propose that 5% of the revenues earned by these companies in Uganda be allocated as taxes. This tax is distinct from those levied on resident companies, and it is not a reintroduction of the Over the Top Tax [tax on the use of social media platforms] which was abolished by the government in 2021," he added.

Indeed, this initiative, described in Article 16 of the 2023 Income Tax Bill, resurfaced after President Yoweri Museveni decided to send the bill back. Reversing his decision, the President asked the Parliament to reconsider its previous rejection of the same proposal.

The tax targets companies like Facebook, Twitter, Google, Netflix, Amazon, and other platforms offering paid services in Uganda.

While the State believes this law will profit the country, the Collaboration on International ICT Policy for East and Southern Africa (CIPESA) and other parties fear that the law, once adopted, would increase digital taxes borne by consumers of digital services who are already heavily taxed in Uganda.

It is worth noting that the proposed tax is part of a set of fiscal laws aimed at guiding the Uganda Revenue Authority (URA) in defining and collecting taxes during the 2023/2024 fiscal year, which began in July.

Samira Njoya