Tax Exemptions On Bujagali Hydropower Project Rejected, Forensic Audit Kicks Off

Tax Exemptions On Bujagali Hydropower Project Rejected, Forensic Audit Kicks Off

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By Spy Uganda

MPs have declined to approve the extension of tax exception to the Bujagali Hydropower Project, which they have also placed under scrutiny for apparent false accounting.

Bujagali, which sought to have its exemptions extended to 2027, will now instead face a forensic audit by a nine-member committee headed by MP Dicksons Kateshumbwa (NRM, Sheema Municipality), during which time it will have up to 2023 to keep benefitting from the exemptions.

This arose during the consideration of the Income Tax Amendment Bill, 2022, during plenary on Wednesday, 18 May 2022 which sought to revise the definition of “exempt organization”, revise the tax rate applicable to individuals and companies for purposes of rental income, and provide for a ceiling on deductible expenses on rental income for non-individuals among others.

MP Nandala-Mafabi accused the other shareholders of the multi-billion shillings hydropower project of fleecing the government of millions of US dollars, which he said is also responsible for the exorbitantly high power tariffs suffered by consumers compared to their regional counterparts.

“This has pushed up power which would have been less than five cents now; we need to give the government six months to carry out the value for money audit of Bujagali to establish the true position of who has been benefitting from Bujagali,” said Mafabi.

MP Herbert Tayebwa criticized the company for earning beyond their share capital, voicing his support for the audit, which Speaker of Parliament Anita Among said will be concluded within three months.

“The return on equity on the share capital of Bujagali is 19 percent…return on equity is the net profit over the share capital; the financials indicate that Bujagali only brought in only US$10 million and therefore the return on equity would be US$1.9 million,” he said adding;

“We also found out that in the computation of the tariff, they paid US$68 million to Bujagali which is 52 percent of the composition of the tariff cost which in our thinking is too high; they should have actually paid them US$1.9 million which they are entitled to; because of that big payment, that is why the cost of tariff is so high,” he added.

Speaker Among said it is unacceptable for the government, which is the majority shareholder, to have no representation on the board that runs the power plant.

“We are the majority shareholders…we cannot continue not having membership on the board; we have to be represented on the board immediately; the dividends that are paid to the other shareholders should also be paid to us…our contribution is US$20 million, theirs is US$10 million; we need dividends as Ugandans,” she said.

On rental income, MPs passed Clause 3 of the bill, which in effect limited expenditures on rental income for taxpayers not being individuals forming allowable deductions to a maximum of 75 percent as provided in Section 22(1) (c) of the Income Tax Act, altering the current legal position which allowed an unlimited deduction on expenditure.

MPs also amended the Third Schedule of the Act to provide a rate of 12 percent of rental income tax on all individuals making more than Shs2.8 million from rent.

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