Parliament stops Bujagali tax exemption

Lawmakers rejected a government proposal to exempt the Bujagali hydroelectric project from income tax and instead demanded a report from the Auditor General on the project.
The decision was taken during the plenary session on Monday, June 6, 2024 when the House considered the Income Tax (Amendment) Bill, 2024.

Spokesperson Anita Among those who chaired the meeting read a letter from the Minister of Finance, Planning and Economic Development, Hon. Matia Kasaijja seeks to have a clause inserted in the bill to grant Bujagali Hydro Power an income tax exemption for one year until June 30, 2025.
“The rationale for this proposal is to avoid increasing the end-user fee as the tax is part of the formula for calculating the fee while we await the Auditor General’s report,” the letter reads.

However, this proposal was rejected at the committee stage, where there was a general consensus of Members of Parliament (MPs) who tasked the minister with setting a deadline within which the Auditor-General’s report would be submitted.

Honorable. Abdu Katuntu (Indep., Bugweri County) said while Parliament tasked the Auditor-General to conduct an audit of Bujagali, MPs are not aware of the status of the audit.
“We can pass this bill without this request and they (ministers) come back with amendments and we discuss in detail as well as passing something we are not sure about,” Katuntu said.

He noted that the government has given up up to Sh380 billion in revenue since 2012, when the tax exemptions began.

Pakwach District MP, Hon. Jane Pacuto expressed her concern about the recurring requests to exempt the energy generator from income tax without a report from the Auditor General.
“The public sees us as if we were playing every year; There are extensions with the excuse that tariffs will rise,” Avur said.

The leader of the opposition, Hon. Joel Ssenyonyi highlighted the danger of granting Bujagali another exemption without the Auditor General’s report, stating that such a decision would be ill-informed.
“If an audit is available and it makes economic sense, we will go ahead and grant the exemption, but right now we are operating in the dark,” Ssenyonyi said.

Honorable. Patrick Oshabe (NUP, Kasanda North County) questioned why government continues to give tax breaks to the power project, despite making profits.
“The tax breaks for Bujagali started in 2012 and were supposed to end in 2017, but the extensions continued, with the claim that the tariffs were going to be reduced and yet instead they increased. Why is Bujagali always on the exemption list?,” Oshabe asked.

The Minister of State for Finance, Hon. Henry Musasizi promised to quickly manage the processing of the Auditor General’s report, stating that it will be ready in six months.
“We must make a decision based on the audit but the audit has been delayed. Immediately after this budget process, I will commit to preparing the Auditor-General’s report,” Musasizi said.

Chairman Among then recommended that the minister reintroduce the proposal through an amendment.

MPs also rejected a proposal seeking to expand capital gains tax to include the sale of land in cities and townships, and the rental of property.

Presenting the report of the Finance Committee, the Chairman, Hon. Amos Kankunda said taxation of capital gains is already covered under section 21 of the Income Tax Act.
“The committee noted that the proposal to expand the scope of the capital gains tax to include land in cities and municipalities does not fall within the principles of vertical or horizontal equity in taxation and, as such, should not form part of the project of law,” it reads. the report in part.

On the other hand, parliamentarians approved the income tax exemption for specialized hospitals and the committee justified that the objective is to attract investments in the provision of specialized medical services.
“The proposal has the potential to promote the development of specialized services in Uganda, which will reduce medical tourism and support tourism to Uganda by patients from neighboring countries,” Konkunda said.

In his minority report, the Hon. However, Ibrahim Ssemujju Nganda (FDC, Kira Municipality) questioned the rationale behind the exemption of specialized hospitals, saying the list of beneficiary hospitals was not used.
“Can the government come up with a list of who qualifies for these incentives before considering this bill?” Ssemujju Nganda said.