By Mulengera Reporters
A long-running dispute over how Uganda’s Over-The-Top (OTT) tax should be measured and enforced has ended with the Tax Appeals Tribunal upholding a Shs33.911 billion assessments against a telecommunications operator, ruling that the Uganda Revenue Authority (URA) was justified in relying on technical data collected through the Data Management System (DMS) to identify customers who accessed OTT services without paying the required tax.
The decision, delivered by Ms. Christine Katwe, found that the assessment raised by the Respondent was valid and dismissed the Applicant’s challenge, ordering the Applicant to pay Shs33.911 billion in unpaid Excise Duty on OTT access for the period between April 2020 and June 2021, together with costs.
The case centred on a major technical and legal disagreement: whether the Respondent correctly identified taxable OTT access by relying on data collected from the mobile network’s Gn/GTP interfaces, or whether it should have relied only on the Gi interface, which the Applicant argued represented actual successful access to internet-based OTT platforms.
The Applicant (which is MTN Uganda) argued that the assessment was based on assumptions, undisclosed methodologies, unreliable thresholds and data that could not prove actual OTT access by identifiable users who had failed to pay the daily Shs200 OTT tax.
However, the Respondent maintained that the assessment was based on independently collected network data, processed through the DMS platform, subjected to reconciliation and audit procedures, and capable of identifying users who accessed OTT services without paying the required tax.
The legal battle over OTT access
The dispute arose after the Respondent (which is URA) raised an additional assessment of Shs33.911 billion in Excise Duty on OTT services, alleging that some of the Applicant’s customers had accessed OTT platforms without paying the Shs200 daily OTT tax.
The assessment was based on paragraph 13(b) of the Second Schedule of the Excise Duty Act, 2018, as amended.
Under the law, telecommunications operators providing data used to access over-the-top services were liable to pay excise duty on OTT access. The duty was set at Shs200 per user per day of access.
The Respondent argued that the law did not require it to reproduce every technical process in legislation but only required the tax administrator to verify whether declarations made by taxpayers were accurate.
The Tribunal considered whether the Respondent’s methodology met the legal standard required under the Excise Duty Act.
The Gi versus Gn/GTP interface dispute
At the centre of the case was a technical disagreement involving where OTT access should be detected within a telecommunications network.
The Applicant argued that the Respondent collected information from the wrong point in the network.
According to the Applicant, the Gi interface represented the point where traffic left the mobile network and moved towards external internet platforms. The Applicant argued that at this stage its systems had already applied controls through the Policy and Charging Rules Function (PCRF), allowing only customers who had paid OTT tax to access services.
The Applicant’s position was that data collected earlier from the Gn/GTP region contained unsegregated information, including failed attempts, blocked requests and incomplete sessions. It argued that merely identifying a subscriber within the GTP region did not prove successful OTT access.
The Applicant maintained that the Respondent should have confirmed actual OTT access from the Gi interface, where customers had successfully reached internet platforms.
But the Respondent disagreed.
Through testimony from telecommunications expert Mr. Laurent Fiacre Sarr, the Respondent explained that the Gn and S5/S8 interfaces provided better subscriber identification compared to the Gi interface.
Mr. Sarr told the Tribunal that the Gi interface connects the mobile operator’s core network to external data networks such as the internet but does not provide sufficient detail to identify individual subscribers.
He explained that the Gn and S5/S8 interfaces carry information through the GTP protocol, allowing identification of subscribers through identifiers such as the International Mobile Subscriber Identity (IMSI), Mobile Station International Subscriber Directory Number (MSISDN), and Packet Data Protocol (PDP) context information.
According to Mr. Sarr, the DMS platform relied on this information because it could link data usage to specific subscribers.
He told the Tribunal that technical teams from the Respondent and the mobile network operators had held several meetings before implementation of the monitoring system.
Technical surveys were conducted to understand the operators’ network architecture and determine the points where interfaces could be mirrored.
Mr. Sarr testified that the design was shared with the mobile operators’ technical teams, who then proceeded to provide access to the requested interfaces.
The Tribunal accepted this explanation, noting that Mr. Sarr was an experienced telecommunications engineer who had worked with governments across several countries on telecommunications audits.
GVG and the DMS system
The Respondent relied heavily on the work of Global Voice Group (GVG), which provided technical expertise for the DMS platform.
The Tribunal heard that before OTT taxation, the Government had engaged GVG in other areas including cinematography controls and anti-money laundering monitoring.
When OTT tax was introduced, GVG became involved alongside URA, Uganda Communications Commission (UCC) and mobile network operators including MTN and Airtel to establish the technical framework for administering the tax.
The Respondent argued that mobile operators had participated in discussions about infrastructure, architecture and implementation.
The Tribunal considered evidence showing communication between UCC officials, GVG and mobile operators concerning cases where subscribers appeared to access OTT services without paying tax.
An email trail tendered as Exhibit REX11 showed correspondence involving Mr. Kenneth Tweheyo, Head of Competition Affairs at UCC, concerning suspected OTT access by subscribers who had not paid the tax.
The correspondence referenced examples of users accessing services such as Facebook despite not having OTT subscriptions.
The Respondent argued this demonstrated that unpaid OTT access existed and that its monitoring system was detecting genuine cases.
Filtering and identifying taxable access
A major challenge raised by the Applicant was whether the Respondent could accurately separate genuine OTT access from ordinary network traffic.
The Respondent explained that raw data collected from the GTP region was subjected to filtering processes designed to remove unsuccessful attempts, blocked traffic and irrelevant information.
Mr. Sarr demonstrated the filtering process before the Tribunal.
The Tribunal found that filtering was a recognised technological process used to separate relevant information from large datasets.
The Applicant had argued that the Respondent failed to demonstrate an efficient or verifiable filtration process.
However, the Tribunal found that the demonstration sufficiently explained how unwanted data was removed and relevant access information extracted.
The Tribunal observed that technology allowed auditors to process large amounts of information quickly and effectively.
The 1KB threshold controversy
Another major dispute concerned the Respondent’s use of a 1KB threshold when identifying OTT access.
The Applicant argued that the Excise Duty Act did not provide for any threshold, whether 1KB, 1MB or otherwise.
The Respondent admitted that the law did not prescribe a threshold but argued that it was simply an audit tool used to identify meaningful data activity.
During testimony, Mr. Grace Aine (RW2) explained that the Respondent used available information on data consumption, uploads and downloads to determine access.
The Tribunal found that while the law contemplated all accesses, the use of the threshold did not invalidate the assessment.
It observed that the threshold actually reduced rather than increased the amount assessed because some smaller accesses were excluded.
The Tribunal concluded that the Respondent was expected to consider all access events, regardless of size, but that the threshold did not render the assessment unlawful.
Multiple accesses, subscriptions and payments
MTN Uganda also challenged the Respondent’s treatment of multiple accesses by individual users.
It argued that users who had purchased weekly, monthly or annual OTT access packages could have been counted multiple times.
Mr. Aine explained that the Respondent applied a formula designed to recognise one taxable access per user per day.
He testified that weekly, monthly, quarterly, semi-annual and annual subscriptions were converted into daily access periods using 7, 30, 90, 180 and 365-day periods respectively.
The Tribunal heard that the system identified users through unique identifiers and considered a user’s access within a 24-hour period.
Mr. Aine explained that if a customer first accessed OTT services at 5am on 1 April, all activity within the following 24 hours was treated as one access day.
The Tribunal accepted this explanation.
On payment verification, the Respondent stated that its objective was to determine access rather than payment records. Once access figures were established, the number of accesses was multiplied by Shs200 and compared against declarations filed by the Applicant.
URA said the Online Virtual Account (OVA) was primarily a record of collections and was not necessary for determining actual access.
VPNs and truncated IMSIs
MTN Uganda also raised concerns over VPN references appearing in the Respondent’s working documents despite an agreement that VPN traffic should be excluded.
URA explained that VPN-related traffic was identified during filtering and removed from the final assessment.
The Applicant further questioned the presence of truncated IMSIs — incomplete International Mobile Subscriber Identities — arguing that these affected the credibility of the audit.
Mr. Aine responded that such entries were insignificant and had been picked directly from the Applicant’s own system.
Tribunal’s conclusion
After considering the evidence, the Tribunal found that the Respondent had sufficiently explained its methodology and supported the assessment.
Ms. Christine Katwe held that the Respondent’s evidence demonstrated that the DMS platform was capable of identifying OTT access and that the assessment was not based on mere assumptions.
The Tribunal rejected the Applicant’s objections, finding that the Respondent had properly exercised its audit mandate.
The final orders were:
- The objection decision stands.
- The Applicant shall pay Shs33.911 billion in outstanding OTT Excise Duty.
- The application is dismissed with costs to the Respondent.
The ruling marks a significant victory for URA’s approach to technology-driven tax enforcement and provides judicial backing for the use of telecommunications data analytics in determining tax compliance. (For comments on this story, get back to us on 0705579994 [WhatsApp line], 0779411734 & 041 4674611 or email us at mulengeranews@gmail.com).
