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Bbumba: I Signed $157M Tax Waiver to Tullow Without Reading Agreement

Former Energy Minister Syda Bumba before COCSASE today

Former Minister of Energy Sydah Bbumba today shocked Members of Parliament (MP) sitting on the Committee of Commissions, cheapest State Enterprise and Statutory Authority (COSASE); revealing that she simply signed a tax waiver for Tullow Oil Company without reading through the Production Sharing Agreement.

Bbumba was appearing before the committee chaired by Abdul Katuntu to explain her signature on the agreement that exempted Tullow Oil a sum of USD 157M in tax.

Bbumba in defense said she was advised by the Solicitor General to sign the documents on her desk but she didn’t know that she was waiving tax from Tullow Oil Company.

She elucidated, visit this site “Article 119(4) of the Ugandan Constitution stipulates that the Attorney General is the legal advisor of government… I was advised by the most competent people in the sector, I wasn’t an oil expert.”

At this point, Katuntu expressed concern that the Minister was advised by people who to him were either incompetent or deliberately misled her for their personal interests, causing the country a USD157Million loss.

“This leaves us in shock and wondering the kind of Ministers that we have in the country who sign documents without first reading through,” noted Mpigi Woman MP, Sarah Nakawunde Temulanda.

The COSASE members are putting final touches on the infamous Shs 6billion Presidential handshake, and are expected soon to present their finding to the floor of parliament.

Background

On October 8, 2001, Australian based Hardman Petroleum Pty Ltd, and the UK-based Energy Africa Ltd entered into a Production Sharing Agreement (PSA) under which they were granted exploration, development and production rights in Exploration Area 2 (EA2).

It was signed by Hon. Syda Bbumba, the Minister of Mineral and Energy Development, for and on behalf of the Government.

Article 23.5 of the PSA for EA2 allowed the oil companies exemptions on capital gains tax/ income tax which exemption was subject of the tax dispute.

The Uganda Tax Appeals Tribunal ruled that the said exemption was invalid under Uganda’s tax laws and that the minister acted outside legal authority.

It was argued then that the exemption was granted to the oil companies to attract investment into the then virtually non-existent oil and gas industry — characterized by small exploration players such as Hardman, Energy Africa and Heritage Oil.

The exemptions were granted for EA2 at a time when there were no exploration competences in Uganda and almost no international risk capital for investment in a country that had no previous history of oil.

However, according to researcher, Emma Mugarura, the Uganda Revenue Authority (URA) took the position that the minister acted outside her powers by granting the Tullow exemption via the Production Sharing Contract instead of via tax laws managed by URA and the matter ended up with Tullow dragging URA to the Uganda Tax Appeals Tribunal.

URA’s defence was that the exemption should have been granted to Tullow by the finance minister not the Minister of Energy.

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