Governments across the globe are establishing consumer taxes for over-the-top (OTT) services — including social media apps — as a way to generate revenue in the age of digital economy. This trend is particularly apparent across Sub-Saharan Africa, where such taxes were introduced in Uganda, Tanzania and Zambia in 2018.

To examine the impact of social media taxation on affordable and meaningful access to the internet, A4AI hosted a webinar with issue experts that revealed four key lessons.

• Governments use a variety of reasons to justify the taxes. As noted by  Eleanor Sarpong, Deputy Director and Policy Lead for A4AI, governments have cited several grounds for the taxes, including curbing the loss of revenue from legacy and traditional telecommunications companies; creating a fair and competitive playing field in the ICT sector; reducing rumours and misinformation online; and moderating online speech for national security reasons.

• Tax impact assessments prove beneficial for governments prior to tax implementation. Christoph Stork from Research ICT Solutions presented the research undertaken by his firm and A4AI on the case of Benin. The report found that such taxes would decrease broadband adoption, broadband usage and operator revenues, and that the cost of implementing the taxes would be too high. Ultimately, Stork noted, the government of Benin needs to be lauded for considering a detailed tax impact assessment before introducing new taxes.

• Governments must pay particular attention to the impact taxes have on women and other groups who are traditionally excluded from digital spaces. Dhanaraj Thakur, Research Director for A4AI and the Web Foundation, presented A4AI’s newest findings of the impact of social media taxation in East and Southern Africa and how these taxes might exacerbate the digital divide.

• The taxes are being challenged by multi-stakeholder advocacy efforts. In the case of Uganda, daily fees for social media usage and mobile money were introduced in July 2018 to raise revenue and to curb gossip in the country. Wakabi Wairagala, the Executive Director of the Collaboration on International ICT Policy for East and Southern Africa (CIPESA) highlighted the messages CIPESA has used to challenge these taxes — including that poor and marginalised groups are hardest hit and that the new taxes could actually lower tax revenue for the country.

When consumer taxes for OTT services are not designed properly, it can have an adverse effect on the objective of revenue generation, erode trust in government and impact how people use the internet.

A4AI will continue to engage in fiscal policy issues that negatively impact affordable and meaningful access to the internet by producing evidence and leading country and regional engagements and global advocacy efforts.

Watch the full webinar and explore the slides.

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