August 2010
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Day August 9, 2010

Ministry of Finance should clarify on Oil Taxes to Ugandans


The issue of Heritage  and oil taxes needs to be clarified.   I bet you some MPs are speaking out because it is the popular thing to do  so. But is it the right thing?  The current MPs including Minister Onek-since when did line ministers have the power to levy taxes.The government cannot  undo what was done when the oil agreements/contracts were signed.   If Ugandans slept on their rights then and  government representatives appended their signature on the document, Iam sorry, there is nothing the MPs or Minister Onek can do. They are too late and totally out of luck.   A deal is a deal, period.

The MPs , Minister Onek and you UAH folks should blame Uganda’s legal representatives, but especially the then Solicitor-General-I suppose it was Mr Peter Kabatsi whose wife is now legal adviser to the president-and the office of Attorney general. Who advised the Ugandan government in its dealings with oil companies? Did Uganda seek outside/private legal help from the big hitters abroad ? If it did, who were they? And if it did not whose fault was it? What are the consequences of violating the contracts? I bet you, those oil companies must have included heavy penalty clauses in there in case Uganda nationalized their oil/violated contract terms.

MPs should be given the proper legal opinion which is: A deal is deal.  Ugandans can then hopefully  learn from the folly of doing things the way they did.   If MPs and Minister Onek are so sure; let them release the oil contracts so we can read and see who is playing to the gallery. That is the price to pay when you have mediocre third rate lawyers right ouf of law school-and having failed bar exams over and over-masquerading as first rate legal brains and serving as legal advisers.  Ugandan are about to find out the painful way that things cheap are actually very costly.

Anyways let the Hon Minister of Finance, Haati  Syda Namirembe Bbumba  pronounce  her self on this matter.   But before you come out swinging reflect on whether the current MPs  and well meaning minister Onek can undo what was done and get away with it.

It should also be noted that  Uganda Revenue Authority(URA) does not make tax policy. It is an agent of the state.  The ministry that should come out and clarify for all Ugandans is the ministry of finance.  The Hon Minister should be asked by MPs and she should be able to make a ministerial statement.   The issues needs to be clarified by the Minister of finance and not Energy Minister Mr Onek.

Some people say that URA has assessed the tax. Let them clarify under what rates. The rates are set by the Ministry of finance. Exmeptions are also set by the ministry of finance.  Once the Ministry exempts certain sectors, there is nothing the rest can do. The minister cannot reverse her or his decision ex-post (after the fact).

The Solicitor-General’s decision is what will cunt in this saga. Who was the SG when the oil contracts were being signed? What legal opinion did he give to the government of Uganda? What about the  Antorney General(AG)? What did they advise the government to do.   Whatever they did cannot be undone period.  If they appended their signatures to the oil contracts recommending, for example ,arbitration in case of of misunderstanding that is what must be done. There is no way out.

The lawyers who advised the oil companies must be international lawyers perhaps based there in the UK.  Did Ugandan get external legal help or did it rely entirely on the office of the SG and AG? How is their record on important national legal opinions/ Blame should be placed at the former SG and AG. They blinked and Uganda has to pay the heavy price.

What Iam trying to do is to caution Uganda that before they fight the oil compnaies, they should read the fine print of the oil contracts.They should also answer the questions: Is the money being fought about income from investment? If the answer is yes, then they can talk about capital gains assuming there are no exemptions.  I also doubt whether the entire portion is subject to capital gains.  If it is subject to capital gains, what portion is subject to such taxation? Is it 100, 50, 25 or 10 percent?  But if the income is deemed cash from operations, then it has to be subject to corporate tax and not capital gains.  These are questions that must be tackled.  There is no need to waste money litigating the obvious. A deal is a deal period. That is the message I want Ms Kesaasi Phionah to covey forward. If the government is not sure, it should swallow hard and let the oil company enjoy its kill. Yes, it hurts but that is what the SG and AG signed onto. Mujjega afa alaba.

And that is why the oil contracts are not being disclosed. The MPs have not seen the fine print of oil contrcats up to now.  The truth of the matter is that no one, not Minister Onek, not URA, not MPs , not Minister Bumba and not even public outrage can undo the oil contracts without paying a heavy fine. Uganda has to live with what the SG and Ag signed on.   I feel sorry for our motherland but it is Uganda’s fault.  There is mediocrity everywhere.


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