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Parliament Rejects Bujagali Tax Waiver As Gov’t Dubiously Gives Energy Company Extra Shs1.28 Trillion

Bujagali hydropower project

Parliament has rejected the request by Ministry of Finance to gift Bujagali Energy Limited another five-year tax waiver, to extend the one the company is flourishing on, until the Company refunds US$342,198,189 about (Shs1.280Trn) it received in excess from taxpayers, through the fictitious tariffs computation methods.

This followed a recommendation made in the report on the Adhoc Committee on Bujagali Tax Waiver, where the Committee Chairperson, Dickson Kateshumbwa (Sheema Municipality), revealed that following a scrutiny of the tariffs computation and equity shares injected in by Government, the total payment to BEL from 2012 to 2022 ought to have been US$329,341,281. Instead, Government paid to BEL a monthly amount of US$ 5,596,204 totaling to US$ 671,539,470 in ten years.

This wrong calculation resulted into an excess payment to BEL so far of US$342,198,189.

“Therefore, the Committee strongly calls upon Parliament to compel the government to renegotiate with Bujagali Energy Limited, the terms in the PPA, before deciding to extend the tax waiver. This is in addition to the recovery of all excess payments of US$342,198,189 about (Shs1.280Trn) for the period of ten years since 2012 plus surcharges. Government should renegotiate the agreement with Bujagali Energy Limited,” Kateshumbwa’s report reads.

Kateshumbwa argued that the hemorrhage and repatriation of resources from Uganda have been modernised through treaties and memorandums of understanding, where investors represented by sophisticated lawyers impose miserly terms on the government and employ tax dodgers to bleed profits from the destitute situations in which the government finds itself.

He argued that at the time the concession between Government and Bujagali was entered, Government was in a poor bargaining position, it did not have the resources to fund the project, and the country could not afford any further delays, which put Uganda in a weaker spot on the bargaining table with Bujagali, but the Committee now wants Government to intentionally protect the public interest and always take an active lead role in monitoring strategic and significant projects such as the Bujagali Hydropower Plant.

It should be recalled that the probe into Bujagali’s relationship with Government followed a recommendation during the consideration of the Income Tax (Amendment) Bill 2022 on 18th May 2022 where Parliament stayed the extension of a five-year Corporate Income Tax waiver, until an investigation with its dealings with Government is probed.

Instead, Parliament recommended to Ministry of Finance to gift Bujagali a one year corporate tax waiver, pending an investigation by the Ad-hoc Committee of Parliament to examine the intricacies of the agreements between Bujagali Energy Limited (BEL) and the Government and the effect of these agreements on the power tariffs to consumers, resulting from the public outcry on high electricity tariffs costs being incurred by Ugandans.

Parliament also wants the Inspectorate of Government (IGG) to probe into the operations of the Electricity Regulatory Authority in the amortization of the return on equity of Bujagali Energy Limited to establish culpable officers of ERA who amortized, a wrong return of equity for BEL with a view of prosecution.

The recommendation by the Adhoc Committee on Bujagali to have the Auditor General audit BEL as per the National Audit Act, given that Government is a shareholder in the project and undertake a value-for-money audit on BEL to establish the actual effect of the cost drivers on the tariff, was also adopted by Parliament.

Attorney General, Kiryowa Kiwanuka welcomed the findings and recommendations in the report, stating that the report points to the challenges both in the structure of the agreement and the implementation of the project, and asked Parliament to accord Government three months within which to study the report, and report back to Parliament on some of the actions that have been taken.

He said, “The issue is that the agreement as the Committee points out wasn’t necessarily favourable given the circumstances that were obtained at the time, however, that shouldn’t be the reason to continue because you need to rethink your position, that is this working for me?”

In defending his decision for extension of time, the Attorney General said that there are quite a number of figures and formulas that have been set down in this report, which require Government to sit down, understand the figures, establish if the figures are the correct ones and if indeed the figures are the correct ones and the wrong formula was used to compute payments to Bujagali, every action necessary will be taken to recover what is rightfully due to government.

“We request that you allow government receive this report and go back and act on it, not to go back and rethink on it, but act on it. Because if the Committee says renegotiate, I have no problem with that. The question is that we need to figure out the terms that are unfavourable, the figures that were wrong and come back to Parliament and submit,” urged Kiryowa.

Although Speaker Among agreed with the request for extension of time within which time frame Parliament would also instruct the Auditor General to carry out a value for money audit, she wondered how Government would fall prey to the investors by injecting in equity into Bujagali, without receiving any returns on investment.

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