Why Museveni has asked Parliament to grant Bujagali one year tax waiver

In January 2023, URA informed Parliament that tax exemptions are likely to cost Uganda revenue worth Shs2.88 trillion in 2023. 

Bujagali Hydroelectric Plant is one infrastructural project that has since inception been inundated in disputes especially those related to its funding, tax waivers or environmental concerns.

The latest of such misdemeanour is that President Yoweri Museveni has asked Parliament to grant Bujagali another one-year tax waiver – the parliament said Thursday afternoon.

The reason for the waiver: to allow both the Auditor General and the company to harmonize the concerns that were recently raised in the Parliament’s Ad hoc Committee report.

The President’s request came with a warning that an abrupt end to the company’s tax holiday is likely to increase cost of electricity in Uganda. Already Ugandans say the cost of power is not affordable.

In a communication to the Speaker of Parliament Anita Annet Among, the President said: ““A clause should be incorporated (in the Income Tax Act) to provide for an extension of one year of corporate tax waiver for Bujagali Hydroelectric Plant.

Whereas I am aware of an ad hoc Committee which parliament put in place to investigate on Bujagali Tax waiver, the waiver of the corporate income tax was one that government put in place to reduce on the generation of tariffs payable by Bujagali, hence leading to a reduction of electricity end user’s tariff,”

According to Parliament, in March 2023, Parliament rejected the request by Ministry of Finance, to gift Bujagali another five year tax waiver, until the Company refunds $342,198,189 about (Shs1.280Trn) it received in excess power tariffs from Ugandan taxpayers, through the fictitious tariffs computation methods upon which payment was made by government.

Also, in January 2023, URA informed Parliament that tax exemptions are likely to cost Uganda revenue worth Shs2.88 trillion in 2023.

The Auditor General, in his December 2021 report raised concern on the absence of clear policies to guide tax exemptions & other investor incentives, saying this exposes the scheme to mismanagement and abuse .

Auditors discovered that 20 beneficiaries whose tax exemption periods had expired continued to enjoy the scheme, after Government failed to follow up.

Parliament has also communicated that the President has refused to sign into law the Income Tax Amendment Bill 2023, until Parliament reviews the proposal to impose a 5% Withholding Tax on digital companies making revenue in Uganda, stating that argument fronted by the Opposition that the digital companies would push the tax unto the residents in Uganda, is false as the tax will be borne by the digital companies.

“The measure was meant to cater for taxation of digital economies such as; Twitter, Amazon, Netflix etc the clause related to non-residents and non-residents in Uganda says it doesn’t relate to residents in Uganda as it was mistakenly stated in the minority report. It should be reinstated,” the President to the Speaker on 26th June 2-23.

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