Kakwenza Rukirabashaija was frustrated with an ad for Jumia Food that popped up when he accessed his free VPN to get online. The ad was “infuriating,” the 32-year-old author posted on Facebook last month. Many of his social media friends, mostly fellow Ugandans, responded in agreement about the bad food ads and the nuisance of pop-up and pre-roll ads with their VPNs (virtual private networks).
Still, ordinary Ugandans like Rukirabashaija have been willing to tolerate the pop-up ads — which even appear in private chats — that come with free VPNs like VPN Master and Thunder VPN so they can avoid paying the government’s “Over the Top (OTT)” tax, better known as social media tax.
“The annoying adverts…I hate them, but to hell with OTT,” wrote one Facebook friend in response to the Uganda author’s post. “[I’d] rather patiently watch the adverts when I open VPN,” they said.
Thanks to VPNs users have found a way around the social media tax. That’s why, on April 29, the government replaced the social media tax with a 12% excise duty on internet data that will likely hike the cost of internet access in the landlocked country that already has some of the highest internet costs in the region.
VPNs first became popular in Uganda among local journalists and political activists during the 2016 national elections, when Twitter and Facebook were temporarily blocked. But VPN use really went mainstream in 2018, after the government introduced the social media tax.
Government officials gave differing reasons for the introduction of the social media tax: Uganda’s finance minister said it was meant to generate revenue; the president, Yoweri Kaguta Museveni, in power since 1986, said it was aimed at curtailing online “gossip.”
But after three years, the tax, which amounts to about 5 cents (200 Ugandan shillings) per day to access any of more than 60 social media platforms, has failed. It has neither helped the government raise significant revenue nor curtailed lively online discussions by young Ugandans.
In its first fiscal year, the Ugandan government was projected to collect about $77.8 million (248 billion Ugandan shillings) from social media tax. Instead, it raised only about $13.5 million (49.5 billion shillings). In the next fiscal year, Uganda lowered its expectations and projected to collect $16.5 million but only just slightly beat its target by raising $18.7 million.
There’s little doubt among industry and regulator insiders that the direct tax failed largely because netizens found a loophole in VPNs.
VPNs work by routing a user’s data traffic through an encrypted virtual tunnel that disguises their IP address and makes their actual location invisible. It means an internet user in Uganda can claim to be in Germany or India or wherever they choose. This has made it difficult for Ugandan authorities to tax their use of social media in Uganda.
Corti Paul Lakuma, an economist at Economic Policy Research Centre, a Ugandan state-funded think tank that advised the government when drafting the new 12% data tax bill, says the new policy is focused on being creative in generating revenue during a difficult period for the economy. There are also other new taxes including an increase in fuel tax. “Government has a lot of things to do, Covid has hurt businesses, and most businesses making money are online,” he said. An indirect tax on internet usage, he said, will perform “extremely well” and will be less controversial.
Ugandan officials now think the government can collect up to $170 million under the new plan. But regulators still want to disrupt the disruptor: VPNs.
VPNs are “difficult animals,” says Ibrahim Bbosa, the spokesperson of Uganda Communications Commission (UCC), the government regulator. He said, “Efforts have been made” to demand that telecom operators block VPN use in Uganda. But while some were indeed blocked for the most part, “It had,” he said, “not been successful.”
For some, using VPNs to avoid paying the social media tax is seen as a form of passive resistance to the 35-year-old regime of President Museveni. The 76-year-old leader has not hidden his disdain for social media and has now blocked popular platforms during the last two elections. Many young people in the country resent that.
“I would rather use a VPN than fund a group of corrupt leaders in government. This is my protest,” Mouris Opolot, a communications practitioner, told Rest of World. He said that he’s tired of new taxes without improved returns in government service delivery.
In addition to new data taxes, during January’s election, the government went further and blocked the entire internet for days ahead of the polls opening. But after it was restored, it maintained a block on Facebook, avenging the takedown of accounts linked to the Government Citizen Interaction Centre, a department in the Ministry of Information and Communications Technology and National Guidance. A network connected with the department had been using fake and duplicate accounts to impersonate users and boost the popularity of posts, a Facebook statement said at the time.
Uganda’s government insists Facebook must reactivate the suspended account before the ban is lifted. Uganda’s minister for information, Peter Ogwang, told Rest of World that discussions with Facebook are still ongoing.
Arguably, the disruption by the social media tax could have long-lasting effects. It upset plans of some tech startups and disrupted fledgling online businesses. Jonan Katende’s JusticeBot, a chatbot configured with Facebook Messenger to provide free basic legal advice, saw its user numbers drop precipitously after the tax came into effect. “Our game is a game of numbers. If we don’t get people to use our bot and perhaps get connected to lawyers, we don’t get businesses,” says Katende.