A surprise tax-the-entertainment sector plan announced by the Uganda Revenue Authority in December 2022 has unsettled many musicians, event promoters, comedians, performers, authors, producers and hotel owners.
The announcement ends days of unpaid taxes and informal fee payments, which guaranteed a gilded life for entertainers. Last month, URA revealed that Uganda has only 2.7 million registered taxpayers out of an estimated 10 million potential taxpayers in the country. Seven or eight million people earning an income are not paying income tax because they are operating informally.
Most singers, event promoters, come- dians, disc jockeys, performers, authors, producers, and hotel owners do not pay taxes. They are informally paid before or after a performance. About Shs 500 billion is generated by the entertainment industry every year.
Interviewed for a comment, Ibrahim Bbosa, the spokesperson of URA, told The Observer, “We have developed a sector-based approach. We are going sector by sector, engaging stakeholders and assisting them with the formalization of their busi- nesses through registration, obtaining Tax Identification Numbers (TIN), onboarding, and teaching them about their tax obligations.”
He said whoever earns an income in Uganda must register for taxes, get a tax identification number, withhold tax on payments to local and international artists, charge value added tax (VAT), and remit it to URA.
“One of the sectors that is fast growing, at least from our last quarter (July to September), is the entertainment sector. We collected about Shs 26 billion between July and September, which demonstrated growth of about 130%. It is a sector where many players, especially the youth, are engaged, having an income; they ought to be able to contribute in terms of tax,” he said.
“We got in touch with sector players like KT Promotions; we wanted to meet them in December, but they told us that they are too busy; so, we opted to meet them in the second week of January. We want them to formalize their businesses, meet their tax obligations, and bring us up to speed on how their businesses work and the challenges they face,” he said.
GUIDE TO ENTERTAINMENT
Here is a step-by-step guide to the taxes entertainers are supposed to pay. Shaban Khamiisi, an accountant and tax consultant, said players in the entertain- ment sector pay withholding tax (WHT). It is a tax withheld at source by the person (event holder) upon making a payment to another person (musician, producer, or artist).
The WHT rates vary depending on citizenship. An event holder has an obligation to withhold six percent of any payment made to local artists. The six percent tax withheld must be remitted to URA within the first 15 days of the month following the period in which the payment or event was made or held, he said.
In the case of a foreign entertainer, the event holder is obliged to withhold 15% of the total payment to be made, and the tax withheld must be remitted to URA before the artist departs the country.
Apart from withholding tax, the event holder has an obligation to withhold six percent on any other payments he makes to service provides (people that give him/her chairs for hire, etc) in case these payments exceed Shs 1 million either singularly or in aggregate.
“The responsibility of filing and payment of the tax withheld rests primarily in the person making payment, for example, promoters, agents, event organizers, or such similar person. In case of his/her failure to withhold the tax, it will be recovered from them,” he said.
In case an artist performing at an event is an employee of the event organizer, for example, Azawi performing at an event organized by Swangz Avenue, Azawi would not be subject to the six per cent WHT, he said.
PAYE AND VAT
However, Swangz would be required to declare Azawi’s bonuses (if they are paid) in addition to her monthly salary in the Pay and You Earn (PAYE) return. He said they are also supposed to pay value-added tax (VAT). VAT is an indirect tax on consumption that is paid by the final consumer, and it is charged at a rate of 18% on the supply of most goods and services in Uganda.
“Entertainment being a taxable service, the event holder or promoter will be expected to charge VAT on all his tickets and any other services served within the premises of the event. Blankets and Wine tickets, for example, cost Shs 150,000 each. Chama Nation, on the other hand, was charging Shs 50,000 to enter a specific corner within the same premises. In that case, VAT would not only be charged on the Shs 150,000 but also on the Shs 50,000 sponsorship income,” he said.
“Most times, when you tell people that they are supposed to charge VAT on their ticket, the first thing that comes to mind is that we must increase prices. With proper education or sensitization, URA can get entertainers to charge the same prices, and also pay their taxes. It is about getting them to learn how these taxes can be applied and then later remitted,” he said.
Where an events promoter receives sponsorship from any other company, he or she must raise an invoice that is VAT-inclusive through the Electronic Fiscal Receipting and Invoicing Solution (EFRIS) to the sponsor, and the income is taxed at 18%.
“They are also supposed to pay income tax. Income tax refers to a type of tax that governments impose on income generated by businesses and individuals within their jurisdiction. So, after declaring WHT and VAT, people generating income in Uganda will be required to file an income tax return and pay the resultant taxes if they made a profit during the year. Income tax rates vary depending on the person,” he said.
Failure to file a VAT return by the due date or within a further time allowed by the commissioner is liable to a fine not exceeding Shs 1 million, and failure to pay the estimated VAT attracts interest at a rate of two per cent per month the tax is not paid.
Khamiisi said there are many incentives players in the entertainment industry can take advantage of because when someone hosts an event, there are very many ser- vices they acquire or purchase, but most of them don’t think about the impact the purchase is going to have on their tax liability.
“If you purchase from someone with a TIN, you pay less tax (chargeable income) compared to someone who has no TIN, and this affects how someone will compete in the market the following financial year because the decisions you make this financial year on your taxes affect your performance in the next financial year,” he said.
“If we don’t educate entertainers about these taxes, they will get scared and find means of avoiding them, which in turn affects the country,” he said.
“We are saying that people who normally employ others in the entertainment sector, for example, if you are a promoter, event or venue owner, such as a hotel where people go and perform, when you are asking people for entertainment services, withhold 6% or 15% for foreign entertainers,” Bbosa explained.
He said withholding tax for local suppliers encourages them because when they file their returns, whatever tax has been assessed for them will be lessened by the amount that was credited in terms of withholding tax. If you do not declare that six per cent, it is charged to you.
“Tax in this country is a self-assessment process. Players in the entertainment industry must basically self-assess, file a re-turn, and then pay tax. Our tax education and our engagement are basically to pro- mote voluntary payment of tax,” he said.
MUSICIANS, PROMOTERS SPEAK
“This is not a new tax or a directive. If you go to our website, we have a section where we produce sector guides for the education sector, health sector, the agriculture sector, and others. The guides are aimed at teaching people what their obligations are in terms of taxes,” he said.
Singer Moses Ssali, aka Bebe Cool, said musicians want to pay taxes. But he said the government should come with two hands, and not one. Come with a hand, that picks the tax and another, that protects us, because very few musicians understand the importance of taxes.
“When government comes to tax the unregulated sector of uneducated, unemployed musicians trying to create jobs, is it trying to help them create jobs or it is so desperate to tax them? This is the only sector where uneducated people earn and live a life and, therefore, government must be sensitive about these issues,” he said.
“The government needs to understand our informal sector, come up with options that can allow every individual to feel comfortable to pay taxes. I told them after my concert that you want VAT, but it is wrong for you to think of taxing the total before I pay my expenses. You should tax my profits to allow me to exist as a business,” he said.
“The sector is so big. The government wants people to join the money economy, but it should not discourage young people from being creative because of taxes. My stand is simple, they should come up with standard fees because VAT, income tax and others are not applicable to our sector except PAYE. I support the government because it must get taxes and we have to be tax-compliant, but it should find better ways of interesting these young people to pay taxes by understanding how their sector operates,” he said.
Interviewed for a comment, Singer Bruno Kiggundu, aka Bruno K, said URA will have a hard time collecting taxes from the entertainment industry.
“I am sure many people in the sector will be jailed because they will not pay.”
“There is a body called UPRS, that collects royalties for musicians. I attended some meetings where artistes said they have never been paid, and the few who received some payments claimed the money was very little compared to the money they invest in producing music. There are still some fishy things in the industry. They have failed to pass the copyright law and implement a strategy of playing 95% Ugandan content, including films, music, and others. People will feel more comfortable paying taxes if the government implements some of these things,” he said.
He said some musicians promote music through social media channels such as Facebook, Twitter and others. The government blocked Facebook. It’s coming to three years.
“I am one of those people who promote and push music through that application. Right now, my Facebook ads account is blocked because I use VPN. Most ad ac- counts in Uganda have been blocked, and the government does not care. All they are thinking about is taxing the industry. What have they done to help us? They will tell you that they gave out Covid-19 relief funds but how many got a share of that money?” he said.
He said the Nigerian government injects a lot of money in the entertainment sector. It implemented the strategy of playing 97% Nigerian content in the country, and that has worked, he said.
“Let government first support the artistes, then it will be easy for them to pay taxes.”
Nasser Zziwa, the manager of David Lutalo, said the government should first engage, reorganize, and streamline the sector before it goes for taxes.
“Until we regulate these companies, which promote Nigerian music and pay huge amounts of money and then pay peanuts to local artistes, government will not get taxes. Do you believe a comedian earn- ing Shs 100,000 will agree to pay taxes to a government that has not invested in him? There are no jobs. They should help us, and we shall pay taxes because each one of us wants to see Uganda prosper,” he added.
Source: The Observer