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URA Lawyers, Big Shots Reward Themselves with Shs 6bn after Winning Oil Case

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Some of the officials that shared Shs 6billion after winning the Oil tax Case
Some of the officials that shared Shs 6billion after winning the Oil tax Case

    By: Giles Muhame

  • Jan 2,2017
  • 6205 Viewed

Uganda Revenue Authority (URA) made payments of over Shs 6bn to high ranking government officials in different ministries as a reward (akasiimo) for winning the Capital Gains Tax (CGT) case against Heritage.

Heritage Oil and Gas Limited (Heritage) and Tullow Uganda Limited (Tullow) were jointly licensed by the Government of Uganda (Government) for petroleum exploration, development and production in Exploration Areas 1 and 3A, in the Albertine Graben, with each having a participating interest of 50% in each of the said Exploration Areas.

On 26th January, 2010, Heritage entered into a Sale and Purchase Agreement (SPA) by which Heritage agreed to sell (transfer) to Tullow its 50% participating interest each of the said Exploration areas 1 and 3A.

By letter dated 2nd February, 2010, Heritage requested for consent for the said transfer of its interest in the said Exploration Areas from the Minister of Energy and Mineral Development in accordance with Section 44 of the Petroleum Exploration and Production Act (PEPA) Cap 150, Laws of Uganda.

By letter dated 6th July, 2010, the Minister gave a conditional consent to Heritage for the proposed transfer of interest subject to the following terms:

  1. “Upon closure of the transaction, Heritage shall pay all taxes accruing from the transaction as shall be assessed by the Commissioner; Uganda Revenue Authority; and
  2. For the avoidance of doubt, the approval shall not become effective unless Heritage has paid all taxes or demonstrated to the satisfaction of the Government of Uganda and that the said taxes shall be paid immediately upon demand.

On 6th July, 2010, the Uganda Revenue Authority (URA) which is a body corporate and the tax collection body for the Government of Uganda issued a tax assessment to Heritage in the amount USD 404,925,000/= as taxes payable in relation to the said transfer (herein after referred as the “First Assessment”)

On 19th August, 2010 URA issued an additional tax assessment to Heritage in the amount of USD 30,000,000/= (herein referred to as “Second Assessment”) Heritage objected to the above assessments contending that the said transfer does not give rise to any tax liability under the Laws of Uganda.  The Government of Uganda on the other hand strongly maintained that the said transaction is taxable under the laws of Uganda.

On 27th July, 2010, the URA issued an Agency Notice under Section 108(1) of the Income Tax Act (ITA) Cap 340 Laws of Uganda to Tullow, appointing Tullow as a Third Party Agent for purposes of collection of the aforementioned taxes payable by Heritage in respect of the First Assessment.

On 2nd December, 2010, the URA issued a further Agency Notice for purposes of collection the aforementioned taxes payable by Heritage in respect of the Second Assessment.

On 26th July, 2010, Tullow and Heritage purported to complete a Sale and Purchase Agreement transaction without the Government’s approval whereupon Tullow paid to Heritage USD 1,045,000,000/= in respect of the Heritage objected to the above assessments contending that the said transfer does not give rise to any tax liability under the Laws of Uganda.  The Government of Uganda on the other hand strongly maintained that the said transaction is taxable under the laws of Uganda.

On 27th July, 2010, the URA issued an Agency Notice under Section 108(1) of the Income Tax Act (ITA) Cap 340 Laws of Uganda to Tullow, appointing Tullow as a Third Party Agent for purposes of collection of the aforementioned taxes payable by Heritage in respect of the First Assessment.

On 2nd December, 2010, the URA issued a further Agency Notice for purposes of collection the aforementioned taxes payable by Heritage in respect of the Second Assessment.

On 26th July, 2010, Tullow and Heritage purported to complete a Sale and Purchase Agreement transaction without the Government’s approval whereupon Tullow paid to Heritage USD 1,045,000,000/= in respect of the transfer.  In addition, Heritage and Tullow deposited 30% of the taxes thereof,  that is USD 121,477,500/= with URA in accordance with Section 103 (2) of the ITA and further deposited the balance of 70% of the taxes thereof (USD 283,447,500) in an Escrow Account held between Tullow and Heritage with Standard Chartered Bank of UK, without Government’s consent and approval.

On the failure by Heritage to pay taxes on the First Assessment in full, Government by letter to Heritage dated 3rd August, 2010, stated that the conditions set out in the letter of 6th July, 2010 had not been met and therefore, the conditional consent had not become effective.  Consequently, the said transfer between Heritage and Tullow was of no legal effect or consequence under section 44 of the PEPA.

On the failure by Heritage to pay taxes on the First Assessment in full, Government by letter to Heritage dated 3rd August, 2010 stated that the conditions set out in the letter of 6th July, 2020 had not been met and therefore, the said transfer between Heritage and Tullow was of no legal effect or consequence under section 44 of the PEPA.

Arising from the above, Tullow could not legally acquire Heritage’s 50% participating interest.  This prompted Tullow to enter into negotiations with Government whereupon, under the Memorandum of Understanding dated 15th March, 2011 between the Government and URA on the one part and Tullow and Tullow Uganda Operations Pty Ltd, Tullow undertook to pay USD 313,447,500/= being the balance of the assessed taxes payable by Heritage on the said transaction, on the strength of the Agency Notices issued by URA to Tullow on the First and Second Assessments.

By letters dated 1st October, 2010 and 18th August, 2010 to URA, Heritage, in accordance with section 99(1) of the ITA objected to the First and Second tax Assessment respectively.

The Commissioner General of URA issued the Objection Decisions to Heritage in respect of the First and Second Assessment by letters dated 1st November, 2010 and 1st December 2010 respectively, in accordance with Section 99(5) of the ITA.

Consequently, in accordance with Section 100(1) (b) of the ITA, Heritage lodged an application for review of the taxation decision before the Tax Appeals Tribunal in Uganda. The Tax Appeals Tribunal ruled in favour of URA and subsequently Heritage filed appeals in the High Court of Uganda.

In total disregard of the on-going dispute proceedings in the Tax Appeals Tribunal, Heritage wrote two letters requesting for re-negotiation of the PSAs and further served two Notices of Arbitration to the Government in respect of the same tax dispute.  (The letters and Notices of Arbitration are attached hereto).

The Government studied Heritage’s claim, found no merit and totally rejected them.

Arising from the foregoing, a need arose to engage External Legal counsel to give support to Uganda Revenue Authority Legal Team in the execution of the Civil Appeal proceedings.

The Tax Appeals Tribunal

HOGL appealed the taxation in the Tax Appeals Tribunal (TAT) in accordance with the laws of Uganda in 2010. The TAT proceedings involved vigorous processes but Government.

After initiating tax appeals in the TAT and while these appeals were ongoing, on 16thMay 2011, HOGL initiated arbitration proceedings in London against government by filing two notices of arbitration (the “Notices of Arbitration”).

The Notices of Arbitration were filed in accordance with Article 3 of the United Nations Commission for International Trade Law Arbitration Rules, 1976 (the “UNCITRAL Arbitration Rules”). HOGL initiated the arbitration on the basis of the arbitrations agreements contained in the two PSAs.

The Government of Uganda acquired the services of the top international arbitration lawyer in the world, George Kahale  III practicing with the firm of Curtis Mallet – Prevost Colt and Mosle LLP chambers , one of the oldest law firms in the world established in 1894.

The aftermath

ChimpReports has learned that after emerging victorious in the CGT case, URA made huge payments to government lawyers and other staff who participated in the legal battle against Tullow.

Officials said had the Ugandan government not taken aggressive steps; it would have missed millions of dollars in capital gains tax.

It is also reported that Tullow associates tried to bribe then URA boss Allen Kagina to ignore the tax but angrily turned down the offer before reporting the matter to the president.

However, questions are being asked about who authorised the questionable payments and what criterion was used in their disbursement to government officials.

According to URA’s monthly payroll of August 2016, the tax body’s Chief Executive Doris Akol received Shs 242m as a reward for winning the case.

On the same payroll, Akol received Shs 40m (gross) as her monthly salary.

Therefore in one month, Akol went home with a staggering Shs 282m (before taxes).

All the figures mentioned in this story reflect amounts of money the officials received before taxes or other deductions were subtracted.

Akol led URA’s legal department that managed the capital gains tax case before being appointed by the president to run the tax collection body.

The former Permanent Secretary in the Ministry of Energy and Mineral Development, Kabagambe Kaliisa bagged Shs 133m.

The then Deputy Attorney General, Fred Ruhindi received Shs 93m.

Interestingly, Shs 393m was wired on the bank account of former Permanent Secretary Finance Ministry, Chris Kassami after he had passed on.

Contacted, Akol asked ChimpReports to obtain a clarification from the URA spokesperson Sarah Banage.

Banage confirmed that indeed the tax body effected payments after the capital gains tax was won.

“Yes, it’s true, we paid some people basing on a directive from the Attorney General,” said Banage.

Asked what criterion was used to make the disbursements, Banage answered: “Everything was based on a directive from the Attorney General. You need to talk to his office. They have all the details.”

We telephoned Attorney General, William Byaruhanga at the end of 2016 but said he was in Hague.

He promised to follow up the matter on return to Uganda.

Efforts to obtain clarification from were yet to bear fruit as he fell short of responding to our telephone calls.

On the list of the paid government officials is the current Finance Ministry Permanent Secretary Keith Muhakanizi who received Shs 108m.

Former Attorney General Peter Nyombi received Shs 226m.

Lawrence Kiiza, a senior official in the Ministry of Finance was paid Shs 102m while Martin Mwambutsya, a Senior Attorney in the Ministry of Justice and Constitutional Affairs took home Shs 232m.

Ernest Rubondo, who heads the Directorate of the Petroleum Authority of Uganda, received Shs 266m.

Solicitor General, Francis Atoke was given Shs 234m while URA lawyer, Ali Ssekatawa got Shs 242m.

The Director of Legal Affairs at the Solicitor General’s office, Christopher Gashirabake, got Shs 242m.

Honey Malinga, who served as Vice Director of the Petroleum Exploration & Production Department (PEPD), was handed Shs 262m.

Moses Kaggwa, a Member Commissioner for Tax Policy Ministry of Finance, got Shs 234m.

Moses Kibumba, a private tax expert having formerly worked with URA for 21 years as a tax auditor, received Shs 93m.

Moses Kajubi who was serving as URA Commissioner, Domestic Taxes, got Shs 226m.

Peter Muliisa, a URA lawyer with a masters in Petroleum Taxation and Finance, was paid Shs 234m.

Rodney Golooba and Samuel Kahima, all lawyers with URA, received Shs 222m and Shs 224m respectively.

Harriet Lwabi Musoke, a senior official at Ministry of Justice and Constitutional Affairs, bagged Shs 242m while Harriet Tukamushaba who works in the same office received Shs 99m.

KCCA Director Jenifer Musisi, who had previously served as head of the legal department at URA, was given Shs 121m.

Robinah Nakakawa, a commissioner at URA, took home Shs 242m while Elizabeth Nakkungu of the Justice Ministry received Shs 238m.

Principal State Attorney George Kallemera got Shs 232M.

Others are Syson Ainembabazi of URA legal department (Shs216m), Assistant Commissioner Tax Investigations, Irene Bashabe Kyomuhendo (Shs 210m) and URA Manager Customs Audit, Agnes Nabwire.

Questions government must answer

1. Why would government officials paid handsomely to defend the people’s interests reward themselves with huge sums of money for doing the work they are paid for?

2. If indeed the money was meant to reward and motivate staff, what criterion was used to make the payments?

3. If the decision to reward these officials was administrative, how come doctors or government soldiers who save lives on a daily basis do not receive bonuses?

4. If these payments were in good faith, why wouldn’t URA and Attorney General’s office share this information with the public in the spirit of accountability?

Note: This story has been slightly edited to reflect the actual figure of the bonuses as Shs 6bn not Shs 7bn as earlier indicated and more background information about the Heritage case has been added – ED.  

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  • Thomas Sankara

    Those questions will never be answered because under the NRM regime we are in a vampire State where the fat cats in government are determine to suck the blood of poor man to the last drop. I wonder what the apologists if this rotten system on this forum like Kaka will have to say about this. What bonuses are give to privates and other junior officers for risking their lives in the jungles Congo, Sudan and the sands of Somalia? What bonuses are given to Government prosecutors for risking their lives by prosecuting terrorists. What bonuses are given to Doctors when they are forced to work on patients without basic tools like gloves? This story is a wake up to Ugandans. You better wake or soon it will be too late. In fact its already late but wake up all the same. The NRM is nothing but a batch of kleptomaniacs’. Theirs is a man eat man society. Only a revolution will save our dear nation from these thugs. Aluta Continua!

  • WADADA. M.R

    Wow, imagine you are paid twice for doing your work

  • WADADA. M.R

    You need to work in the right office at the right time with the right people

  • Opio Saviour

    Time is the best judge, all will be recovered under new government.
    But under NRM, let’s rest our case.

  • Rhodsa

    This is ashaming. There is a misunderstanding of what governance is about! No wonder we should forget development!

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