Parliament should reject a five-year tax holiday for the Bujagali Hydro Power Dam – according to civil society

Members of civil society speaking to the press. (Parliament should reject a five-year tax holiday for the Bujagali Hydro Power Dam – according to civil society)

Civil society organizations have petitioned Parliament to reject the Ministry of Finance’s request to grant Bujagali Hydro Power Dam another five-year tax exemption, claiming that Uganda’s faltering economy cannot afford any additional tax breaks.

Henry Baziira, a member of the Tax Justice Alliance, made the statement while speaking to journalists in Kampala about the nine proposed tax legislation tabled by the government.

“Because of the exemption granted to Bujagali, the government’s tax expenditure of money we have foregone is Shs108 billion in 2019/2020, and it was Shs100 billion in 2020/2021.” These exemptions come at a high expense to the government, and in order to renew the exemptions for Bujagali, they must first conduct a study to determine whether the benefit of the exemption is still justifiable.

He also rejected the Ministry of Finance’s proposal to tax the income of a manufacturer whose investment capital is at least US$35 million for a foreign investor or US$5 million for a citizen, and who has the capacity to source at least fifty percent of locally produced raw materials, subject to availability; and the capacity to employ a minimum of one hundred citizens.

According to Regina Navuga, Tax Expert at the Southern and Eastern Africa Trade Information and Negotiations Institute (SEATINI) Uganda, the estimated loss to tax exemption was Shs7.7Trn in the Ministry of Finance Tax Expenditure report 2020/2021, and in the absence of a cost-benefit analysis on these exemptions, Parliament should drop this proposal.

During the introduction of the Income Tax Amendment Bill 2022, Henry Musasizi, Minister of State for General Duties, suggested amending Section 21 of the Income Tax Act to prolong the income tax exemption for the Bujagali Hydro Power Project from July 1, 2022 to June 30, 2027.

If Parliament approves this request, it will mean that the Bujagali Hydro Project has been exempted for 20 years, with the original exemption being for 10 years and the corporation receiving another exemption in 2017 for 5 years, which ends in June 2022.

Navuga also praised the amendment to Section 89 of the Income Tax Act, which states that failure to file a return or deliver any other document within the time stipulated by this Act shall result in a penalty of not less than US$ 50,000 and not more than US$ 500,000.

She did, however, request that the penalties be limited to US$50,000, claiming that allowing the Commissioner General of the Uganda Revenue Authority such authority would encourage corruption and prejudice between the URA and the oil companies.

Meanwhile, Speaker Anita Among has directed the Finance Committee to complete their findings on the tax bills in order for Parliament to supply money in the budget by the May 31st deadline for passing the national budget. (Parliament should reject a five-year tax holiday for the Bujagali Hydro Power Dam – according to civil society – celebrity jazz ug)