By Spy Uganda
Parliament has rejected a proposal by the Ministry of Finance to exempt Bujagali Electricity Limited from paying income tax for an additional seven years. Instead, lawmakers approved a one-year extension, intended to give the Attorney General time to renegotiate what several Members of Parliament (MPs) described as unfavourable and unbalanced terms in the current agreement between the Government of Uganda and the company.
The decision was reached on May 14, 2025, during the consideration of the Income Tax (Amendment) Bill, 2025. The bill sought to amend Section 21(1) of the Income Tax Act to extend Bujagali’s tax exemption until June 30, 2032, in alignment with the power purchase agreement (PPA) between the government and the Bujagali Hydropower Project.
Presenting the report of the Committee on Finance, Planning and Economic Development, Committee Chairperson Hon. Amos Kankunda (Rwampara County) urged Parliament to adopt the proposed exemption. He argued that maintaining the tax waiver until 2032 would be consistent with the provisions of the PPA. “The Committee recommends that Bujagali Hydro Power Project be exempted from income tax for a period of seven years, as proposed in the Bill,” Kankunda said.
However, this position was met with strong resistance—even from members within the Finance Committee itself. MPs including Hon. Ibrahim Ssemujju Nganda (Kira Municipality), Hon. Nandala Mafabi (Budadiri West), and Hon. Karim Masaba (Mbale Industrial Division) opposed the proposal, citing a history of unfulfilled promises and poor returns on previous tax exemptions.
Ssemujju, the Shadow Minister for Finance, sharply criticized the Finance Ministry’s approach, which he described as incremental and lacking transparency. “The Minister has adopted a piecemeal strategy—bringing back the same request annually after Parliament rejected a similar proposal in 2022. The original justification for the exemption has not been achieved,” he argued.
He dismissed assertions that refusal to grant the exemption would result in increased electricity tariffs, instead highlighting the significant tax benefits already accrued by the company without a corresponding reduction in tariffs. “By 2021, Bujagali had already received UGX 388 billion in exemptions, yet tariffs continued to rise,” Ssemujju noted.
He further referenced findings by the Auditor General which questioned the company’s financial conduct. According to the audit, Bujagali improperly claimed insurance costs amounting to $114,114, expenses that should have been borne by its suppliers. The Auditor General also recommended government acquisition of voting shares in the company, given Uganda’s lack of influence in board-level decisions.
The minority report presented by Ssemujju and other MPs called for a comprehensive cost-benefit analysis before any future exemptions are considered. “We need to establish the actual benefit to the Ugandan economy, assess financial returns, and consider implications on electricity tariffs,” he stressed.
Hon. Nandala Mafabi warned against the long-term nature of the proposed exemption, stating it would constrain the legislative authority of the incoming 12th Parliament. “We cannot bind the hands of the next Parliament. Bujagali must pay its fair share of taxes. Any excess profits should be remitted to the Consolidated Fund,” he said.
Hon. Jonathan Odur (Erute South) accused Parliament of facilitating capital flight under the pretense of investment promotion. “We are burdening ordinary Ugandans with taxes while wealthy investors avoid theirs. Let us restore dignity and accountability in this House,” Odur stated.
Hon. Karim Masaba proposed limiting the exemption to one additional year, ending in June 2026, to allow time for reassessment by the next Parliament. Similarly, Hon. Felix Okot (Dokolo South) supported a short extension, cautioning against long-term commitments in the absence of renegotiated terms.
Despite mounting opposition, Minister of State for Finance Hon. Henry Musasizi urged Parliament to consider a compromise. “We are tired of returning each year. That is why we requested a seven-year exemption,” Musasizi said.
Attorney General Kiryowa Kiwanuka, however, offered no assurance that renegotiations would occur, noting, “Negotiation requires the consent of both parties. Parliament may direct it, but if the other party declines, it may not happen.” On the tariff impact, Kiwanuka stated that if taxes are imposed, the cost would likely be transferred to consumers.
He also revealed that, despite previous recommendations by Parliament to recover $348 million from Bujagali due to inflated cost calculations, no legal directive had been issued to initiate recovery. “We need to fully understand the consequences of our legislative decisions,” he cautioned.
In conclusion, Parliament voted to grant Bujagali Electricity Limited a one-year income tax exemption extension, up to June 30, 2026. The decision aims to provide time for the Attorney General and relevant stakeholders to renegotiate the terms of the PPA. MPs underscored that any further exemptions must be based on clear, transparent justifications rooted in national interest and economic benefit.
