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Bujagali Tax Waiver To Cost Gov’t Shs95.6Bn In Revenue

Government has defended its decision to grant Bujagali Energy Limited another year tax waiver despite admitting that the exemption if granted will cost Shs95.6Bn in foregone revenue.

The revelation was made by Sidronius Okasai, Minister of State for Energy while appearing before Parliament’s Finance Committee expressing Government’s concern that the End-user power tariff is likely to increase by 5.7% before the end of this month, should Parliament reject a proposal to grant an extension of corporate income tax waiver for Bujagali Energy Limited.

The Minister said, “The estimated corporate income tax for Bujagali energy is Shs95.6bn when this corporate income tax is recovered through electricity end user tariff, electricity end user tariff shall increase by a waited average of 5.7% in July 2023. We also have received some communications from the Ministry of Finance asking us to contribute towards the audit, we have got to budget, own it as a ministry and provide it to the auditor general. So that activity is going on and the audit is projected to take six months if we provided money now.”

This follows a letter authored by President Museveni asking Parliament to grant Bujagali Hydroelectric Plant another year tax waiver to allow both Auditor General and the company to harmonise, on recommendations made in Parliament’s Ad hoc Committee.

The President wrote in his June 2023 letter to Speaker Among noting, “A clause should be incorporated to provide for an extension of one year of corporate tax waiver for Bujagali Hydroelectric Plant. Whereas I am aware of an ad hoc Committee which parliament put in place to investigate on Bujagali Tax waiver, the waiver of the corporate income tax was one that government put in place to reduce on the generation of tariffs payable by Bujagali, hence leading to a reduction of electricity end user’s tariff.”

However, the lawmakers led by Muwanga Kivumbi (Butambala County) rejected the Minister’s pleas arguing that Parliament took a stand against extending Bujagali’s taxwaiver and therefore, the legislature shouldn’t be dragged in the forensic audit being conducted.

“Parliament recommended no further extension of the waiver, in addition, Parliament a forensic audit, to force Bujagali to be able to pay us back the money they owe Ugandans. It wasn’t to establish whether a waiver is required or not required, that wasn’t under contention. So, the forensic audit undergoing in Bujagali has nothing to do with the resolution of Parliament to terminate the waiver,” remarked Kivumbi.

Patrick Isiagi (Kachumbala County) tasked the Ministry of Energy to explain how the budget shortfall will be covered if Bujagali doesn’t pay its corporate tax noting, “We did a budget and you submitted the resource envelop now when you get this waiver since you went to cabinet, what have you taken to cabinet to deal with that shortfall of revenue, what have you adjusted?”

It should be recalled that in March 2023, Parliament rejected the request by Ministry of Finance, to gift Bujagali Energy Limited another five years tax waiver, until the Company refunds US$342,198,189 about (Shs1.280Trn) it received in excess power tariffs from Ugandan taxpayers, through the fictitious tariffs computation methods it gave to Government, upon which payment was made.

Minister Okasaai informed the Finance Committee that all issues raised in the Parliament report will be addressed in the forensic audit that has been commissioned by the Ministry of Energy, which exercise will likely take 6months and likely to cost the Office of the Auditor General Shs2.3Bn and this exercise will run parallel to another one being conducted by Uganda Revenue Authority that is also auditing Bujagali Electricity Limited.

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