Officials from Tax Justice Alliance appearing before Parliament’s Finance Committee
Tax Justice Alliance has rejected the proposal by Government to extend another year tax waiver to Bujagali Electricity Limited, on top of the other waivers the company has enjoyed in the past, describing the waiver on Corporate Income Tax as illogical as this is only charged on profit making companies, and the waiver will see Ugandans forego over Shs80Bn.
Leading the rejection was Aloysious Kittengo, Tax Policy Analyst, at the Southern and Eastern Africa Trade Information and Negotiations Institute (SEATINI) –Uganda, the Secretariat of Tax Justice Alliance while appearing before Parliament’s Finance Committee last week, to present their views on the tax bills including the Income Tax Amendment Bill 2025 and Excise Duty Amendment Bill 2025.
“According to the Tax Expenditure Report FY2022/23, the exemption for the income of Bujagali Hydro Power Project for 5years up to 2022 (extended to 2027) is projected to cost Uganda Shs80.69Bn. Income Tax is levied on profits, therefore, if the company of Bujagali is making losses, they will not attract income tax. Therefore, there is no need for awarding an exemption,” explained Kittengo.
This followed the presentation of the proposal by Ministry of Finance seeking Parliamentary approval to amend Section 21 of the Income Tax Act, Cap. 338, to exempt the income of the Bujagali Hydro Power Project from tax up to 30th June 2025 in order to allow the company to offer a low electricity tariff to consumers.
The Activists however rejected the grounds fronted by Government for Bujagali Electricity Limited arguing that despite the previous tax waivers, Uganda hasn’t witnessed any drop in the cost of power.
“However, the power tariffs has remained high until today, thus challenging the objective of lowering the tariffs. This far from anticipated,” explained Kittengo.
According to Kitengo, the current end-user electricity tariffs for the period January 2025 – March 2025, tariff peak range from Shs753.0 kWh commercial consumers- code 10.2, averaging at 575.2 kWh, Shs775.7kWh domestic consumers code 10.1, Shs574.0 for medium industrial consumers-code 20, averaging at Shs417.8 kWh, and Shs466.7 kWh for large industrial consumers-code 30, averaging at Shs351.5 kWh, consumers code 10.1, Shs574.0 for medium industrial consumers-code 20, averaging at Shs417.8 kWh, and Shs466.7 kWh for large industrial consumers-code 30, averaging at Shs351.5 kWh.
Tax Justice Alliance further revealed that numerous studies have consistently demonstrated that tax incentives impose a substantial cost on government revenue without delivering a commensurate boost to investments.
Kittengo noted, “Considering this, the need to repeal of Tax incentives stands out as the most optimal course of action. However, if outright repeal is not viable, the next best alternative is a comprehensive reform of tax incentives to align them more effectively with investment outcomes, reducing the fiscal burden while maintaining the potential benefits they can offer.”
According to Tax Justice Alliance, before any consideration for renewal of the exemption as proposed by the Ministry of Finance, there is a need to conduct and audit to assess the impact of Bujagali on revenue mobilization efforts.
Kittengo explained, “The Ministry of Finance should undertake a cost-benefit analysis on the revenue foregone through awarding of the exemption to Bujagali and the beneficiaries in terms of tariffs rates for all categories of the end user to effectively control revenue leakage stemming from the misuse and abuse of tax exemptions in Uganda. With the need to finance the national development agenda, there is a need to rationalize the tax exemptions in line with the Domestic Revenue Mobilization Strategy.”
Reports indicate that Bujagali tax exemption has cost Ugandans revenue worth Shs469.390bn in the last five years.
