Friday August 6 2010

MPs want Heritage to pay oil taxes

By Yasiin Mugerwa

Lawmakers have insisted that the government gets the entire $404.9 million (about Shs809.9 billion) in taxes from the Heritage deal. A group of lawmakers including Bugweri MP Abdul Katuntu yesterday wrote to Energy Minister Hillary Onek, asking him to suspend the planned consent on the deal until Parliament pronounces itself on the matter.

“We have come to learn that the 30 per cent capital tax gain payable by Heritage amounting to $404.9 million…is a subject of a dispute and contention, Heritage Oil and Hardman resource having sold their entire stake to Tullow Oil,” the letter reads in part.

“Further information is that Heritage Oil which is liable to pay the tax is seeking international arbitration. This international conspiracy cannot be allowed since these (oil) agreements are subject to Uganda law jurisdiction.”

The new developments in Parliament come after Sunday Monitor reported that President Museveni had also personally insisted that the taxes due to the government from the deal be paid in full.

In the midst of the dispute, Heritage has since demanded that the outstanding tax dispute be submitted to binding arbitration in London and offered to deposit $108 million (about Shs216 billion) with the Ugandan Revenue Authority (URA) which would be refunded to Heritage if it is ultimately determined that no tax is payable.
The dispute arose after Heritage, on July 7, issued a statement claiming that no tax is payable on the deal because the government has in the past not taxed previous assets or corporate transactions in Uganda’s oil sector.

Abuse of trust
However, Shadow Finance Minister Oduman Okello and Public Accounts Committee Chairman Nandala Mafabi argued that if the government accepts the arbitration deal, the move would tantamount to abuse of public trust and demanded that Heritage pays the taxes in full.

“This is public funds we are talking about here,” Mr Okello said, adding: “What we want to see is a cheque of Shs809.8 billion to URA, not ridiculous negotiations in London. We want our money and in full amount and nobody should play games”
When contacted on the matter, Minister Onek said: “MPs are right, Ugandan law should prevail.” The government has since January refused to approve the sale until Heritage pays full capital gains tax on the deal.

The termination of the planned tax arbitration means that if Heritage fails to pay the full amount, their assets will not be transferred to Tullow Oil even as the company insists that the tax issue was “purely between Heritage and the government.”