Parliament sets conditions for Bujagali tax waiver

Kampala, Uganda | THE INDEPENDENT | Bujagali Energy Limited (BEL) will refund US$342 million to the Ugandan government for overpaid fees subject to a forensic audit by the Attorney General.

This is after Parliament chaired by Speaker Anita Among on Wednesday, 15 March 2023 adopted the report of the Adhoc committee on Bujagali.

The decision was made after a decade-long overpayment issue that resulted from incorrect calculations made during billing.

In 2007, the government entered into a shareholders agreement related to the operation of Bujagali Energy Limited with Bujagali Holding Power Company Limited, SG Bujagali Holdings Limited and Bujagali Energy Limited.

The project’s total equity was US$199 million.

In May 2022, Parliament stayed the extension of a five year Corporate Income Tax (CIT) waiver and instead granted one year pending an investigation by the Ad-hoc Committee.

Presenting the report of the Adhoc committee, the Chairperson, Dickson Kateshumbwa said that the total payment to BEL between 2012 and 2022 should have been US$329 million but instead the government paid US$671 million resulting in an excess payment of US$342 million.

Hon. @Kateshd is moving a motion for adoption of the report of the adhoc committee on the Bujaggali tax waiver. #PlenaryUg pic.twitter.com/4XETP4wLaI

— Parliament Watch (@pwatchug) March 15, 2023

The committee also recommended for recovery of all taxes that were not paid by Bujagali before the exemption amounting to US$63 million during the first five years of development of the project.

The committee also tasked the Inspectorate of Government (IGGI) to take interest in inquiring 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.

“Therefore, the committee strongly calls upon Parliament to compel the government to renegotiate with Bujagali Energy Limited, the terms in the Power Purchase Agreements, before deciding to extend the tax waiver. This is in addition to recovery of all excess payments and application of proper figures in the calculation capacity payments going forward,” he said.

He also called on the IGG to investigate the US$5 million expensed through Uganda Electricity Transmission Company Limited (UETCL) to ascertain how, where and whether the money was spent. Additionally, the committee called for the Auditor General to audit the application of US$15 million expensed to UETCL, while the Ministry of Finance has also been called to account for US$2.83 million.

The Attorney General agrees with the findings of the report. He has asked the House to allow govt receive the report and act on it and then return to Parliament with a report. #PlenaryUg pic.twitter.com/4vxHgFYi9D

— Parliament Watch (@pwatchug) March 15, 2023

The committee also recommended that BEL refunds the wrongly claimed insurance costs with interest.

Kateshumbwa said that even with the government intervention of the tax waiver on BEL operations and the refinancing of the Bujagali hydropower project, the current Bujagali tariff is US cents 8.30 per kwh which is still over and above the government target of US cents 5 per kWh.

“Therefore, the consideration of an extension of CIT waiver should only be made after the refund of excess payments by BEL and completion of renegotiation,” Kateshumbwa said.

The Attorney General, Kiryowa Kiwanuka said government will receive the report and act on it.

He requested for three months to update to the House on renegotiating the contract and working on the issues raised by the committee.

Kaberamaido County Member of Parliament,  Alfred Edakasi said government should review the policy on tax waivers.

“When we went to benchmark in Zambia, we noted that tax holidays and waivers did not necessarily benefit that country. I would like to propose that government reviews this policy of tax waivers,” he said.

Kimanya-Kabonera Division MP,  Abed Bwanika proposed that Parliament should urge the government to review the project as this could allow it to renegotiate or terminate.
His proposal was adopted by the House.

The Speaker of Parliament Anita Among tasked the Auditor General to carry out a forensic audit on Bujagali and have a report presented within two months.

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SOURCE: Parliament media