President Yoweri Museveni has returned the Income Tax Amendment Bill (2023) to Parliament for reconsideration.
According to Museveni, the Bill requires a new clause to be incorporated in order to provide an income tax waiver on Bujagali hydroelectric power plant for a period of one year.
The Speaker of Parliament, Anita Among made the communication to Members of Parliament during a Parliamentary sitting on Thursday.
President Museveni expressed concerned with clause 12 of the Bill that sought to amend section 38 to enable the carry forward of tax losses after five consecutive years of making losses.
“The measure is thus intended to limit the practice of indefinite deferral of payment of corporate tax. It should, therefore, be reinstated,” Among read Museveni’s letter to MPs.
President Museveni also expressed concern with clause 16 of the Bill where Parliament rejected the introduction of income derived from non-residential persons on digital services. The president said the clause should be reinstated in the Bill to allow this tax on digital services to non-residents of Uganda.
“The clause related to non-residents of Uganda, since it doesn’t relate to residents in Uganda as was mistakenly stated in the minority report, should be reinstated,” Among told MPs.
In the reconsideration of the Bill, the president wants Parliament to incorporate a new clause that will provide a one-year exemption from corporate income tax for the Bujagali hydroelectric power plant.
“A clause should be incorporated to provide for an extension of a one-year corporate income tax waiver for Bujagali hydroelectric power plant,” Among read Museveni’s communication to MPs.
The Shadow Minister of Finance who doubles as Butambala county MP, Muwanga Kivumbi said, “we (the country) have lost trillions of money.”
Kivumbi said that since Bujagali sells power to Government of Uganda, the thinking of lawmakers to grant it tax exemptions in the past was that, if it was taxed, the tariff would shoot up.
“Our view [now] is, for how long should we continue to lose this amount of money. We investigated Bujagali, I was part of the committee that investigated Bujagali, and found out that we have lost trillions of shillings of money, and Bujagali should begin to pay,” he said.
ALSO READ: Proposed Taxes: The Income Tax Amendment Bill 2023
ENDLESS TAX EXEMPTIONS FOR BUJAGALI
This is not the first time for Bujagali to enjoy tax exemptions.
In May last year, the Minister of State for Finance in charge of General Duties, Henry Musasizi on behalf of government, proposed to Parliament, an amendment to Section 21 of the Income Tax Act to extend the income tax exemption for Bujagali by five years from July 1, 2022 to 30th June 2027.
Parliament rejected the government’s proposed extension of the corporate income tax exemption for 5 years. The House rather agreed to grant an exemption for only 1 year up to 2023.
Musasizi explained that the purpose of the proposed amendment was to reduce the average electricity tariff of Bujagali Hydro Power Project by 4.7% from US cents 10.62 per kilowatt-hour during the period.
He said that the previous 5-year tax holiday which was granted to Bujagali from July 1, 2017 to June 30, 2022, had an impact and reduced the project power tariff from an average of US cents 13.83 per kilowatt-hour to US cents 10.62 per kilowatt-hour.
Bujagali has in the past benefited from 15 years’ tax holiday and this was the third time that the government sought to extend the exemption.
Bujagali Dam which is the largest power plant in the country with a capacity to generate 250MW, was inaugurated in October 2012.
IRREGULARITIES
In May 2022, the speaker of parliament Anita Among set up an ad hoc committee after parliament rejected the request to extend the five-year tax exemption to the company that runs Bujagali power plant, and instead agreed on a one-year exemption so as to allow government to conduct a forensic audit into the earlier 15-years’ tax exemption.
The committee sought to ascertain the government’s equity contribution to Bujagali, return on investments, the cost-benefit and value for money for the income tax exemption over time among others.
The committee unveiled inconsistencies in the ownership and registration of Bujagali Energy Ltd, the company that owns and operates a 250MW hydropower plant on the River Nile.
The committee learnt that Bujagali Energy Limited was formed by two individuals, each injecting Shs 1 million. But the duo forfeited their shares after the company was incorporated.
The revelation attracted questions from MPs on how a Shs 2 million company came to win a multi-billion contract and the government’s basis to invest $20 million (Shs 77.2 billion) therein.
The committee also learned that the said company signed agreements in 2005 yet it was incorporated in 2007.
It remains to be seen whether MPs will further debate the Income Tax Amendment Bill (2023), and make amendments as asked by the President, or they will stand their ground, and send it back to the President, intact for signing.
Meanwhile, President Museveni also returned the Tax Procedure Code Amendment Bill (2023) to Parliament for debate. The President is concerned with section 38 which was not in the original Bill presented to Parliament by Government.
