MPs Raise Mixed Reactions Over Government’s Move To Extend Tax Exemption For Bujagali Power Generation Company To 2027 

MPs Raise Mixed Reactions Over Government’s Move To Extend Tax Exemption For Bujagali Power Generation Company To 2027 

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By Spy Uganda

The Parliamentary Committee on Finance, Planning and Economic Development has commenced scrutinising the new Tax Bills for the Financial Year 2022/23.

The government through 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.

Among the contentious issues that raised dust during the committee meeting chaired by Hon. Keefa Kiwanuka is the proposal to amend the Income Tax Act to extend the income tax exemption for Bujagali Power Generation Company from 01 July 2022 to 30 June 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.

According to the Minister of State for Finance for General Duties, Hon. Henry Musasizi, another five-year income tax exemption would reduce the average electricity tariff of the Bujagali hydropower 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.

However, MPs rejected the proposal saying that the 15-year tax exemption that Bujagali has benefitted from is sufficient for the project to find its economic muscle and operate optimally without such incentives.

“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. Ordinary Ugandan pay for the land, pays all taxes, but Bujagali is exempted and walks away with all the profits,” Muhammad Nsereko (Kampala Central Division) said.

Moroto County MP, Hon. 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.

Hon. Paul Omara (Otuke County) said the government should stop ‘babysitting’ Bujagali while Hon. Nathan Nandala-Mafabi (Budadiri County West) said that it is high time Bujagali started contributing to the national treasury in terms of tax collections.

The MPs also disagreed with the 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.

However, in the case of non-individual rental taxpayers, the new reform seeks to limit the deductible expenses to a maximum of 50 per cent 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 10 years to a foreign manufacturing investor and Ugandan citizen who invest at least US$35 million and at least US$5 million respectively.

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

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