Uganda to spend an extra 9.3billion on Heritage Tax Case

Government requires an extra sh9.3b in the next financial year to sustain its ongoing court battle with Heritage Oil and Gas Ltd before an arbitration court in London.

According to Bafaki, the Undersecretary in charge of Finance and Administration in the Justice Ministry, the money will be expended on arbitration costs for foreign lawyers, allowances for the Uganda team led by the Attorney General’s chambers, research, consultancies and travel expenses.

In June last year, parliament appropriated sh11.9b to buttress government in its $404m tax dispute with Heritage Oil.
This money was inclusive of the legal fees for external lawyers who were sourced for their unique expertise in international commercial arbitration in oil and gas related matters.

The dispute arose after Heritage, which had been jointly licensed with Tullow Uganda Ltd to carry out petroleum exploration and development in Exploration Areas 1 and 3A, in the Albertine Graben, chose to sell its fifty percent stake to the latter at $1.04b.

The Uganda Revenue Authority subsequently imposed $404m as tax accruing from the transaction, a decision that Heritage has since stridently objected to.

However, the government of Uganda on the other hand has strongly maintained that the transaction between Heritage and Tullow is taxable under the laws of Uganda.

Legislators have urged government to come up with a schedule on how to clear all outstanding compensations and court awards to stem the specter of money owed to individuals and companies shooting to unmanageable levels.

Bafaki said the figure has shot up from sh220 to sh256 in a period of one year.

The sh36b increase has been occasioned by old compensation claims and court awards attracting interest and new ones coming on board.

During an interface with a delegation from the justice law and order sector headed by Prime Minister Amama Mbabazi, MPs queried the rationale of earmarking a ‘paltry’ sh4b to cater for court awards and compensations in the next financial year.

“It’s prudent for government to come up with a schedule to clear this money. At the current rate, you might end up paying over sh40b annually in interest rate on this money,” shadow Attorney General, Abdu Katuntu said.

MPs Medard Sseggona, Wilfred Niwagaba and Ayena Odong tasked government to explain the modus operandi of settling court awards, which has seen rich people with huge sums compensated a head of others.

“Finance finds it convenient to award billions in compensations to the very rich, but ignore awards in tribunals to the very poor in our communities,” Niwagaba said.

Legislators invoked the example of Basajjabalaba’s HABA Group and Dura Cement, which were expeditiously awarded sh162b and sh35b respectively in a space of one year.

MPs on the Legal and Parliamentary Affairs committee of parliament want a system of “first in first out”, which will see individuals and companies with older claims take precedence over new ones.

The Prime Minister decried the manner in which government is saddled with economically debilitating court awards and promised to crack the whip.

“There has been a lot of indiscipline by civil servants which borders on criminal negligence. Government takes a dim view of the actions by some individuals which have led to court wards against the state,” Mbabazi explained.

He, however, maintained that the government’s limited “resource envelope” does not permit it to clear all outstanding court awards at ounce.

Court awards and compensations are normally awarded by Human Rights tribunals to victims of torture by state security agents and sometimes costly litigation as a result of breach of contract by government.

By Moses Walubiri
The New Vision Newspaper
23-May-2012