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House halts Bujagali tax exemption

KAMPALA, May 7, 2024 – A proposal by government to exempt the Bujagali Hydro Power project from income tax has been rejected by the Members of Parliament who instead demanded a report of the Auditor General on the project.
The decision was taken during the plenary sitting on Monday as the House considered the Income Tax (Amendment) Bill, 2024.

Speaker of Parliament, Anita Among who presided over the meeting read a letter from the Minister of Finance, Matia Kasaijja seeking an insertion of a clause in the Bill to give Bujagali Hydro Power a one-year income tax exemption up to June 30, 2025.
“The rationale of this proposal is to avoid escalation of the end user tariff since tax is part of the formula for computing the tariff as we await the report from the Auditor General,” read the letter in part.

This proposal was however, rejected at committee stage, where there was a general consensus from the MPs who tasked the minister to give a timeframe within which the Auditor General’s report would be presented.

The Bugweri County MP, Abdu Katuntu said that whereas Parliament commissioned the Auditor General to perform an audit of Bujagali, MPs do not know the status of the audit.
“We may pass this Bill without this request and they [ministers] come back with amendments and we discuss in detail other than passing something we are not sure of,” said Katuntu.

He pointed out that government has foregone up to Shs380 billion in revenue since 2012 when the tax waivers started.

Pakwach District Woman MP, Jane Pacuto  raised concern over the recurrent requests to exempt the power generator  from income tax without a report from the Auditor General.
“The public is looking at us as playing games every year; there are extensions with the excuse that tariffs will go high,” said Avur.

The Leader of the Opposition in Parliament [Lop], Joel Ssenyonyi explained the danger of granting Bujagali another exemption without the Auditor General’s report, saying that such a decision would not be well informed.
“If an audit is available and it makes economic sense, we go ahead and give the exemption but right now we are operating in the dark,” said Ssenyonyi.

Patrick Oshabe, the Kasanda North MP wondered why government continues to grant the power project tax exemptions, despite making profits.
“Tax exemptions for Bujagali started in 2012 and they were supposed to end in 2017 but extensions still went on, with the saying that tariffs were going to reduce and yet they instead increased. Why is Bujagali always on the list of exemptions,” Oshabe asked.

Speaking on behalf of government, the Minister of State for Finance, Henry Musasizi committed that he will expeditiously handle the processing of the Auditor General’s report, saying that it will be ready in six months.
“We must make a decision based on the audit but the audit has delayed. Immediately after this budget process, I will undertake to pursue the Auditor General’s report,” Musasizi said.

Among then guided that the minister re-introduces the proposal through an amendment.

Bujagali Hydropwer plant located near Lake Victoria, on the Victoria Nile, is run by Bujagali Energy Limited [BEL] is a leading power producer. The project is Africa’s largest privately financed hydropower project and currently the largest Clean Development Mechanism project registered in a least developed country.

When commissioned in 2012 Bujagali was the largest hydropower generation facility in Uganda and nearly doubled Uganda’s peak electricity supply, eliminated daily load-shedding and provided a reliable solution to meet the country’s increasing power demand.

BEL has a capacity based pass-through supply agreement with Uganda Electricity Transmission Company Ltd (UETCL) expiring in 2042.

“The 250MW plant currently contributes up to 31 percent of Uganda’s effective energy capacity, setting a unique precedent for Public-Private Partnerships in the region,” says Alaister McDougall
BEL General Manager.

Meanwhile, MPs also rejected a proposal that sought to expand capital gains tax to include the sale of land in cities and municipalities, and rental property.

While presenting the report of the Committee of Finance, the Chairperson, Amos Kankunda said that the taxation of capital gains is already catered for under Section 21 of the lncome Tax Act.
“The committee observed that the proposal for the expansion of the scope of capital gains tax to include land in cities and municipalities does not fall within the principles of vertical or horizontal equity in taxation and as such should not stand part of the Bill,” read the report in part.

However, the House approved income tax exemption for specialised hospitals with the committee justifying that the aim is to attract investment in the provision of specialised medical services.
“The proposal has the potential to promote the development of specialised services in Uganda which will reduce medical tourism and support tourism in Uganda from patients coming from neighbouring countries,” Konkunda said.

In his minority report, Hon. Ibrahim Ssemujju Nganda, the Kira Municipality questioned the motive behind exempting specialised hospitals saying that the list of the benefiting hospitals was not availed.
“Can government table a list of who qualifies for these incentives before consideration of this Bill,” said Ssemujju Nganda.

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