impact of uganda’s ict taxes - cipesa
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IMPACT OF UGANDA’S ICT TAXES
Research ICT Solutions
EXPECTED IMPACT OF THE SOCIAL MEDIA (SM) TAX• Social Media Tax:
• = less data consumption • = less MNO revenues • = less VAT • = less custom excise • = less corporate tax
• Study aims: • To put a number to the net tax effect • Estimate impact on GDP growth and job creation
• Side effects: • Wider mobile money use (to pay taxes) • Increase in consumer VPN skills
RIS
DATA AND MOBILE MONEY REVENUES KEY FOR MTN’S PERFORMANCE
RIS
1H13
2H13
1H14
2H14
1H15
2H15
1H16
2H16
1H17
2H17
2,6872,5062,6612,8042,6082,5402,6652,6242,4162,051
1H13
2H13
1H14
2H14
1H15
2H15
1H16
2H16
1H17
2H17
970848878844792663655649519351
Total Revenue in R(m)
Data + Digital revenue in R(m)
IMPACT OF SOCIAL MEDIA AND MOBILE MONEY TAX
RIS
Without Tax
With Tax
Mobile broadband and mobile money are still going to grow after the initial shock, but from a lower base and potentially also at a lower rate
Data use mobile money transactions
IMPACT OF EXCISE TAX ON VOICE AND SMS TRAFFIC - EXAMPLE GUINEA
RIS
Q1 2013
Q2 2013
Q3 2013
Q4 2013
Q1 2014
Q2 2014
Q3 2014
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Q1 2016
Q2 2016
Q3 2016
Total voice traffic (millions of minutes) SMS traffic (millions of SMSs)
Intro of tax on voice
Intro of tax on SMS
Source: IMF, 2017
INTERNET AND SOCIAL MEDIA ARE SYNONYMS
RIS
RIA’S NATIONAL SURVEYS: SHARE OF SOCIAL MEDIA USERS AMONG INTERNET USERS SHOW THAT MOST INTERNET USERS USE SOCIAL MEDIA
Source: Research ICT Africa 2017/8 After Access Survey
https://researchictafrica.net/2018/07/23/impetuous-policies-increasing-digital-divide-in-uganda-social-media-tax/RIS
Mozam
bique
Ghana
Kenya
Nigeria
Tanzania
South Africa
Rwanda
6678
9093939799
Figures for Uganda will be released in August -survey is still ongoing
SOCIAL MEDIA TAX OF UGX 6000 PER MONTHS AS SHARE OF AVERAGE INCOME BY SUB REGION
RIS
KampalaCentral I
KigeziCentral II
AnkoleBunyoro
TooroLango
West NileTeso
ElgonBusoga
KaramojaAcholi
Bukedi 22.6%19.6%
14.2%13.2%
11.1%10.3%
9.2%8.3%
6.6%6%5.8%5.8%5.7%
4.5%2.4%
MONTHLY SOCIAL MEDIA TAX AS & OF AVERAGE INDIVIDUAL INCOME
RIS 2016/17 Uganda National Household Survey (UNHS)
Average HH income in UGX
Average HH size
Average Individual income
SM tax as share of Individual income
Kampala 938,000 3.7 253,514 2.4%
Central I 569,000 4.3 132,326 4.5%
Central II 463,000 4.5 102,889 5.8%
Busoga 222,000 4.9 45,306 13.2%
Bukedi 141,000 5.3 26,604 22.6%
Elgon 260,000 4.8 54,167 11.1%
Teso 357,000 6.1 58,525 10.3%
Karamoja 220,000 5.2 42,308 14.2%
Lango 370,000 5.1 72,549 8.3%
Acholi 168,000 5.5 30,545 19.6%
West Nile 294,000 4.5 65,333 9.2%
Bunyoro 468,000 4.7 99,574 6.0%
Tooro 436,000 4.8 90,833 6.6%
Ankole 489,000 4.7 104,043 5.8%
Kigezi 476,000 4.5 105,778 5.7%
IMPACT OF SOCIAL MEDIA TAX ON PREPAID DATA PRICES
RIS
MTN - PREPAID DATA PRODUCTS
RIS
Bundled Data MB Validity Once off Price SM tax for validity Cost incl. SM tax Price increase
Monthly
25 30 1,500 6,000 7,500 400%
300 30 5,500 6,000 11,500 109%
600 30 10,000 6,000 16,000 60%
2,000 30 20,000 6,000 26,000 30%
10,000 30 50,000 6,000 56,000 12%
30,000 30 100,000 6,000 106,000 6%
Weekly500 7 5,000 1,400 6,400 28%
1,500 7 10,000 1,400 11,400 14%
5,000 7 20,000 1,400 21,400 7%
Daily
15 1 250 200 450 80%
40 1 500 200 700 40%
100 1 1,000 200 1,200 20%
300 1 2,000 200 2,200 10%
1,000 1 5,000 200 5,200 4%
Social bundle
WTF 1 250 200 450 80%
SWIFT 1 500 200 700 40%
SWIFT 7 2,500 1,400 3,900 56%
SWIFT 30 5,000 6,000 11,000 120%
Average 62%
AIRTEL - PREPAID DATA PRODUCTS
RIS
Bundled Data MB Validity Once off Price SM tax for validity Cost incl. SM tax Price increase
Monthly
25 30 1,500 6,000 7,500 400%
300 30 5,000 6,000 11,000 120%
1,250 30 15,000 6,000 21,000 40%
1,000 30 10,000 6,000 16,000 60%
1,750 30 20,000 6,000 26,000 30%
5,000 30 30,000 6,000 36,000 20%
12,000 30 50,000 6,000 56,000 12%
7,000 30 60,000 6,000 66,000 10%
25,000 30 90,000 6,000 96,000 7%
15,000 30 105,000 6,000 111,000 6%
20,000 30 75,000 6,000 81,000 8%
35,000 30 225,000 6,000 231,000 3%
51,000 30 150,000 6,000 156,000 4%
100,000 30 550,000 6,000 556,000 1%
Weekly
100 7 2,000 1,400 3,400 70%
350 7 3,500 1,400 4,900 40%
850 7 10,000 1,400 11,400 14%
5000 7 20,000 1,400 21,400 7%
1000 7 7,000 1,400 8,400 20%
3000 7 15,000 1,400 16,400 9%
3 days400 3 3,000 600 3,600 20%
1000 3 5,000 600 5,600 12%
Daily
10 1 250 200 450 80%
40 1 500 200 700 40%
100 1 1,000 200 1,200 20%
300 1 2,000 200 2,200 10%
Average 41%
AFRICELL - PREPAID DATA PRODUCTS
RIS
Bundled Data MB Validity Once off Price SM tax for validity Cost incl. SM tax Price increase
Monthly
25 30 1,450 6,000 7,450 414%
100 30 4,400 6,000 10,400 136%
125 30 4,900 6,000 10,900 122%
250 30 9,750 6,000 15,750 62%
350 30 13,500 6,000 19,500 44%
500 30 19,500 6,000 25,500 31%
1,000 30 34,500 6,000 40,500 17%
1,500 30 44,500 6,000 50,500 13%
2,000 30 49,500 6,000 55,500 12%
3,000 30 59,500 6,000 65,500 10%
3,500 30 75,000 6,000 81,000 8%
5,000 30 89,000 6,000 95,000 7%
7,000 30 104,000 6,000 110,000 6%
10,000 30 124,850 6,000 130,850 5%
40,000 30 315,000 6,000 321,000 2%
100,000 30 480,000 6,000 486,000 1%
80,000 30 430,000 6,000 436,000 1%
Weekly
50 7 1,750 1,400 3,150 80%
80 7 2,500 1,400 3,900 56%
200 7 5,500 1,400 6,900 25%
800 7 21,900 1,400 23,300 6%
Daily
20 1 250 200 450 80%
50 1 500 200 700 40%
120 1 1,000 200 1,200 20%
320 1 2,000 200 2,200 10%
600 1 3,200 200 3,400 6%
900 1 4,500 200 4,700 4%
1,200 1 5,000 200 5,200 4%
1,500 1 6,500 200 6,700 3%
2,000 1 8,500 200 8,700 2%
3,000 1 12,000 200 12,200 2%
Average 40%
UTL - PREPAID DATA PRODUCTS
RIS
Bundled Data MB Validity Once off Price SM tax for validity Cost incl. SM tax Price increase
Monthly
500 30 14,500 6,000 20,500 41%
1,000 30 28,000 6,000 34,000 21%
3,000 30 65,000 6,000 71,000 9%
5,000 30 100,000 6,000 106,000 6%
10,000 30 115,000 6,000 121,000 5%
Weekly 100 7 2,000 1,400 3,400 70%
Daily50 1 600 200 800 33%
100 1 1,000 200 1,200 20%
Average 26%
ASSUMING DATA IS USED EVERY DAY FOR SOCIAL MEDIA
RIS
MTN Airtel Africell UT
23%41%40%
62%
MTN Airtel Africell UT
8
3126
18
Prepaid data increase across all prepaid data products due to SM tax
Number of products
SOCIAL MEDIA TAX DISCRIMINATES LOW USAGE DATA BUNDLES - I.E. THE POOR
RIS
Pric
e in
crea
se th
roug
h SM
tax
0%
125%
250%
375%
500%
Monthly data in MB for data bundles below 5GB
0 1250 2500 3750 5000
MTN Airtel Africell UT
IMPACT OF SOCIAL MEDIA TAX ON OECD BASKETS
RIS
CHEAPEST PRODUCT FOR 1GB PREPAID PER MONTH
RIS
2014_Q2
2014_Q3
2014_Q4
2015_Q1
2015_Q2
2015_Q3
2015_Q4
2016_Q1
2016_Q2
2016_Q3
2016_Q4
2017_Q1
2017_Q2
2017_Q3
2017_Q4
2018_Q1
2018_Q2
4.3
2.82.82.8
0.3
3.63.73.83.63.63.53.54.0
5.25.65.85.9
Uganda was briefly the cheapest in Africa with offer from Smart with product Twemal’Egogga Offering 100 MB daily for a month for a once off payment of UGX 1,000
SM tax impact
CHEAPEST PRODUCT FOR 1GB PREPAID PER MONTH
RIS
2014_Q2
2014_Q3
2014_Q4
2015_Q1
2015_Q2
2015_Q3
2015_Q4
2016_Q1
2016_Q2
2016_Q3
2016_Q4
2017_Q1
2017_Q2
2017_Q3
2017_Q4
2018_Q1
2018_Q2
2 23
5
21
23
4
89
10
1
7 79
17
Uganda was briefly the cheapest in Africa with offer from Smart with product Twemal’Egogga Offering 100 MB daily for a month for a once off payment of UGX 1,000
SM tax impact Ranked 10th cheapest without SM tax
CHEAPEST PRICES FOR PREPAID MOBILE BROADBAND FOR Q2 2018
RIS
Monthly prepaid
data
Price in USD Price increase
in %
Ranking in Africawithout SM
tax with SM taxwithout SM
tax with SM tax
100 MB 0.67 2.27 240.1% 10 17
500 MB 1.60 3.20 100.0% 10 17
1 GB 2.67 4.27 60.0% 10 17
2 GB 3.99 5.59 40.1% 10 17
5 GB 6.39 7.99 25.0% 10 17
10 GB 7.99 9.59 20.0% 10 17
20 GB 22.86 24.46 7.0% 10 16
Average 70.3%
SM tax adds UGX 6,000 per month to the bill, assuming every day SM use.
IMPACT OF MOBILE MONEY TAX
RIS
COST RELATIVE TO TRANSACTION AMOUNT AMOUNT
RIS Cash to cash transaction to unregistered user
500
2501
5001
15001
30001
45001
60001
125001
250001
500001
1000001
2000001
4000001 3.9%
5.4%
6.2%
7.5%
8.5%
9.7%
12.0%
11.8%
15.8%
24.3%
65.7%
72.9%
232.3%
2.6%
3.6%
4.2%
5.0%
5.7%
6.8%
8.7%
8.5%
11.7%
18.4%
51.6%
55.2%
232.0%
MTN without tax MTN with tax
500
2501
5001
15001
30001
45001
60001
125001
250001
500001
1000001
2000001
4000001 4.2%
7.1%
8.0%
9.2%
10.0%
12.5%
13.8%
12.9%
17.4%
26.4%
68.1%
75.3%
266.3%
3.0%
5.3%
6.0%
6.7%
7.2%
9.6%
10.5%
9.6%
13.4%
20.5%
54.0%
57.6%
266.0%
Airtel without tax Airtel with tax
AVERAGE COST RELATIVE TO TRANSACTION AMOUNT
RIS
MTN Airtel
40.9%36.6% 36.1%
31.9%
Without Tax With Tax
Cash to cash transaction to unregistered user
AVERAGE COST RELATIVE TO TRANSACTION AMOUNT
RIS
Price increase across all transaction amounts due to mobile money tax
13.2%
14.9%
MTN Airtel
CONCLUSION
• Social Media tax lets Uganda slips from 10th to 17th rank in terms of prepaid data prices
• Across OECD data baskets the SM tax results in a 70% price increase on average
• Across operator products the SM tax results in 23-62% price increase on average
• Mobile money tax results in a 13-15% price increase for cash to cash transactions to unregistered users.
RIS
NEXT STEPS
• Expand price analysis • Estimating price elasticities • Calculating net tax effect • Estimate impact on GDP growth and job creation
RIS
RIS
STEVE ESSELAAR PARTNER, RIS
MBA
DR. CHRISTOPH STORK PARTNER, RIS
PHD, ECONOMICSwww.researchictsolutions.com
+27 84 999 000 2
www.researchictsolutions.com
+1 778 865 5695
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