MPs, minister clash over proposal to extend tax holiday for power company

KAMPALA – Parliament’s Committee on Finance, Planning and Economic Development, has started understudying the new Tax Bills for the Financial Year 2022/2023, with the legislators questioning government’s proposal to exempt Bujagali Power Generation Company from paying taxes for another five years.

State Minister of Finance, Planning and Economic Development in charge of General Duties, Henry Ariganyira Musasizi, who on Friday presented nine tax bills before the committee told the Mps that government is not introducing new taxes in the next financial year.

“Therefore, the proposed amendments on the various tax laws mainly provide clarifications of ambiguous provisions, close loopholes in the tax laws and simplify the tax laws with a view of supporting tax administration and promoting voluntary taxpayer compliance, which will ultimately enhance revenue mobilisation and collection,” Musasizi said.

However, among the contentious issues that were hotly debated during the committee meeting chaired by MP Keefa Kiwanuka is the proposal to amend the Income Tax Act to extend the income tax exemption for Bujagali Power Generation Company from July 1, 2022 to June 30, 2027.

Bujagali Power Generation Company, which owns and operates the Bujagali Power Station was first given a 10-year tax exemption in 2007 and later given another five-year exemption in 2017 which expires this year.

Minister Musasizi said another five-year income tax exemption would reduce the average electricity tariff of Bujagali hydro power project by 4.7 per cent from the current US cents 10.62 per kWh to about US cents seven per kWh.

“Our economy is much better when the cost of doing business is low in terms of power, transport and money among others. So the Bujagali Power Project is aimed at reducing the cost of doing business for Ugandans.  Bujagali has not yet recouped and if we deny them this exemption then the cost of power is likely to increase,” Musasizi said.

But the MPs who were not convinced by Minister Musasizi’s proposal rejected it saying that the 15-year tax exemption that Bujagali has benefitted is sufficient for the project to stand on its own without government support.

“In 2017, this committee was persuaded to renew this exemption for the last time with the view that tariffs would come down to US cents seven per kWh, but it is still at 10 cents. I am not among those who will again exempt Bujagali. An ordinary Ugandan pays for land, pays all taxes, but Bujagali is exempted and walks away with all the profits,” Kampala Central MP Muhammad Nsereko said.

Moroto County MP Samuel Okwir, said that giving Bujagali another tax exemption would shift the burden on ordinary Ugandans to cover the gap with no assurance of economic benefits from the project.

Otuke County MP Paul Omara urged government to stop what he called ‘babysitting’ the power company while Nathan Nandala-Mafabi (Budadiri County West) said that it is high time Bujagali started contributing to the national treasury in terms of tax revenue.

The MPs also disagreed on government’s proposal that intends to streamline the rental income tax regime by imposing a flat rate of 12 per cent on the gross rental income of individuals for a year of income with no deductions for any expenditure incurred.

The finance ministry is proposing adjustments to the Income Tax Act, Stamp Duty Act, Tax Appeals Tribunal Act, Excise Duty Act, Value Added Tax, Tax Procedures Code Act, Tax Appeals Tribunal Act, Traffic and Road Safety Act and the Uganda Revenue Act.

However, in the case of non-individual rental taxpayers, the new reform seeks to limit the deductible expenses to a maximum of 50 percent of the gross rental income. MPs were opposed to this new tax regime saying it favours companies that own rentals at the expense of individuals and that it would in return shift the burden on tenants.

The Income Tax (Amendment) Bill, 2022 also seeks to amend the principal act to provide an income tax exemption for a period of 10 years to a foreign manufacturing investor and Ugandan citizen who invest at least US$35 million and at least US$5mln respectively.

The new tax bill also intends to provide an income tax exemption for a period of 10 years to a hospital facility developer who invests at least US$5mln.

https://thecooperator.news/energy-association-opposes-increased-funding-for-era/

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