Outrage as Tullow Oil Loses Shs1 Trillion Case to Uganda

The Kampala art biennale that seeks to showcase contemporary art due for August this year has seen handcrafted silver jewelry make a comeback in the jewelry business to outshine gold prices that skyrocketed and became a lot more expensive for the local population.

As tourism venture, buy more about preparations for the event are in high gear with hundreds of traders sorting out their best art pieces to be showcased for the first time in Kampala and Africa.


Uganda Tourism Board says the Art Biennale will bring together artists from across the world into Uganda to present and sell some of their best pieces including art work, this facial paintings and above all engage in an artistic competition to be evaluated by a panel of internationally acclaimed judges.


“Silver jewellery is popular in today’s society than ever before as they are both fashionable, trendy  and more distinctive than many of the gold pieces available in today’s fashion jewellery market,” Fatuma Nalunkuma, a fashion designer told ChimpLyf on Wednesday.


According to Fatuma, she intends to register for the event to present different products she has in stock with an emphasis on the availability of the handmade jewelleries.


She insists women involved in the business are pleased with the phenomenon because it has helped to engage new handcrafted jewellery designers to emerge and express their talents besides improving their household income.



Fatuma pointed out whereas gold was too precious in the 80s and 90s, the evolution of the locally made art pieces is taking the market by storm “as designers create different type of jewellery items you can imagine such as bracelets, earrings, necklaces and rings, of course; belt buckles, arm bands and so much more.”
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Tullow Oil plc has announced its intentions to appeal against a ruling delivered Wednesday by Tax Appeals Tribunal (TAT) in Uganda ordering the oil firm to pay Uganda Tax Revenue Authority $407m (Shs1 trillion) as Capital Gains Tax (CGT), cheapest Chimp Corps report.

The tribunal which comprised Asa Mugenyi, George Wilson Mugerwa and Pius Bahemuka, agreed that this the biggest case (in monetary terms), involving the largest transaction of US$ 2.9 billion, in the legal history of Uganda.


Following the completion of the farm-down of 66 percent of its assets in Uganda to CNOOC and Total in 2012, Tullow was issued with a CGT assessment by the Uganda Revenue Authority (URA) of approximately $472m.


Tullow paid 30 percent of the assessment (approximately $142m) as legally required to launch an appeal.


Tullow said the ruling from the TAT is lengthy and deals with a number of different issues and will therefore require significant further legal evaluation.


TAT ruled against Tullow on the key issue of the express tax exemption contained in the Production Sharing Agreement for Exploration Area 2 (EA2 PSA).


The TAT has calculated Tullow’s CGT liability for the farm-downs, including certain reliefs, to be $407m, of which $142m has already been paid by Tullow.


In a statement issued Wednesday evening, Tullow said it “believes that the amount already paid exceeds its liabilities in relation to CGT on EA1 and EA3A.”


However, the oil firm noted, “there are specific points in the ruling that Tullow may wish to challenge relating to these two Areas.


A specific CGT exemption was included in the EA2 PSA. Tullow is extremely disappointed that the TAT ruled that the then Minister of Energy did not have the legal authority to grant such an exemption.”


“Tullow believes that the TAT has erred in law and Tullow will challenge the EA2 assessment through the Ugandan courts and international arbitration but hopes that further direct negotiation with the Government can resolve this matter.


Tullow considers, based on external legal advice, that the international arbitration tribunal will award in its favour.”


Government submitted that Tullow are not entitled to the reinvestment relief because they did not reinvest the proceeds in an asset of a like kind and that the oil firm’s claim that they used the proceeds from the sale of the interests in the PSA to fund pre-existing costs is incorrect.


Government also insisted that Tullow by using the sales proceeds to fund their development obligations under the PSAs they were discharging pre-existing debt.


“This is not an asset of like kind acquired and there is no reinvestment at all. The respondent also argued that the applicant reinvestment was not made within one year of disposal,” government lawyers argued.


Court today ruled that the applicants were aware that they were required to pay taxes.




The Tribunal found that Article 23.5 of the EA2 PSA was intended to cover capital gains tax arising from the disposal of interests in the PSA.


It further ruled that Article 23.5 of the EA2 PSA is invalid under the tax laws of Uganda and therefore Tullow are not entitled to an exemption from the payment of capital gains tax.


The Tribunal also discovered that the applicants cannot rely on the principle of legitimate expectation as their expectation was not legitimate.


It was decided that the disposal of 16.67 percent of their interest by Tullow was involuntary and that the oil firm is entitled to a re-investment relief of up to 25 percent of the interests they disposed of.


The Tribunal also found that Tullow are still entitled to an extension of time to furnish evidence of re-investment in an asset of a like kind.


The hearing committee directed Tullow to pay capital gains tax of US$ 407,095,366 basing on the evidence adduced before the Tribunal being the amount after the pre-investment relief.


The total amount of capital gain tax before the pre-investment relief was US$ 542,793,821.


Tullow will deduct the statutory 30 percent paid from the US$ 407,095,366 and the balance outstanding shall attract an interest of 2 percent per month from the date of this ruling till payment in full.


Tullow are entitled to a re-investment relief of US$ 135,698,455.


The Tribunal ordered that the applicants pay two-thirds of the costs of this application to the respondent.


The tribunal said URA, in its collection of taxes, should not attempt to kill the hen that lays golden eggs or consider it as inappropriate or attempts at “manipulation of figures” when its assessments are challenged.




Commenting today, the oil firm’s Executive Director, Aidan Heavey, said Tullow is very concerned by this ruling which ignores a contractual term signed by a Government Minister in Uganda.


“Tullow is Uganda’s largest foreign investor and a major taxpayer. Over the last 10 years, Tullow has spent $2.8 billion in Uganda and discovered 1.7 billion barrels of oil. This money was spent by Tullow on the understanding that our contracts with the Government, which contained important incentives to invest that were vital at a time when no oil had been discovered in Uganda, would be honoured. We will now carefully consider all our options to robustly challenge this ruling.”


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