WGI’s Context to Criticizing the Shs.6b Cash Rewarded to Public Servants involved in the Heritage and Tullow Oil Tax Dispute Case

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WGI’s Context to Criticizing the Shs.6b Cash Rewarded to Public Servants involved in the Heritage and Tullow Oil Tax Dispute Case

January 14, 2017 1:18 pm | Published by admin

Heritage Oil and Gas sold out to Tullow in 2010 and made an income that was subject to a 30% Capital Gains Tax (CGT) of about US$434million. Heritage Oil was reluctant to pay the tax and government of Uganda sought to sue Heritage Oil for the tax. A case was filed by Heritage Oil in British Courts in a bid to dodge paying the tax. Uganda and Tullow Oil were respondents in the case.  In 2011, President Yoweri Museveni met senior officials from URA and four lawyers who assured him of a win, if he pursued litigation measures against Heritage. The President promised the lawyers and URA a “handshake” if they won the case. Uganda hired Curtis Mallet-Provost, Colt & Mosle LLP – an international law firm – at a cost of about $10m to help in the litigation in London. Alongside this law firm, a local firm Kampala Associates was hired at a cost of Shs.2billion in legal fees to support the legal battle. URA lawyers and staff at the Attorney General’s Office also participated in the legal suit. The case was ruled in favour of Uganda and Tullow. Consequently, Tullow oil remitted the CGT it had withheld from Heritage to URA.

It was reported in the media that on May 17, 2015 President Museveni met URA lawyers and other high-level officials who had participated in the Capital Gains Tax case and was reminded of the promise he had earlier made in respect of rewarding the winning team with a “handshake”. It is reported that during the meeting, President Museveni directed URA Commissioner General Ms. Doris Akol to recommend an appropriate reward for the team. 

Media further reported that on June 26, 2015, a month later, Ms. Doris Akol, the Commissioner General of URA, proposed to the President that a sum of Shs6billion was an appropriate reward to the team, arguing that it was less than 1% of the amount in the award and is 50% of the costs awarded to the government of Uganda. She further argued that of the 6billion, 2.3billiong would be deducted as tax and the net sum to be paid to the awardees would only be 3.6billion. According to the reports, Akol further attempted to justify the amount saying that it would enable beneficiaries use the funds for something tangible i.e. to leave a legacy to remind them and their offspring of their contribution to the nation – for instance the recommended amount could enable one to either acquire a decent plot of land; pay a deposit on mortgage or perhaps facilitate finishes on home construction. Akol is said to have further suggested that the Shs 6bn would be motivation sufficient for them to gallantly face future challenges and bring glory and victory to our nation. The URA Commissioner General is reported to have told Museveni that the amount proposed would be distributed among 42 individuals that make up the core, non-core and support staff of the team (Read more). Interestingly, the top beneficiaries of this project, including Akol, are well paid government officials. Akol is reported to earn Shs 40m (gross) per month as salary minus other benefits.

President Museveni is reported to have responded to Ms. Akol’s proposal to award the team the Shs6billion in a letter addressed to the Minister of State to Finance Matiya Kasaija recommending the payment to be made as a token of appreciation.

While there is nothing wrong with awarding public officials for jobs well done or their contribution to national matters, Water Governance Institute is of the opinion that the manner in which such a payment was done was erroneous and violated many governance principles, including the following:

  1. URA is essentially responsible for the assessment, collection and disbursement of tax from the tax payers to the Consolidated Fund through the Ministry of Finance, Planning and Economic Development. Having taken on the role of making payment off the Consolidated Fund without Parliamentary approval was a violation of URA’s role and the Public Finance Act 2015.
  2. Even though the Public Finance Act 2015 accords the Secretary to the Treasury powers to appoint accounting officers, this power does not include changing the overall mandate of URA or violating procedure that involves parliament’s appropriation of expenditure of national character.
  3. URA is responsible for the payment of costs and wages of its staff and related core operations. Having made payments to individuals that are not URA staff or individual’s on URA’s associated assignments/contracts was a violation of its mandate.
  4. Government of Uganda had already contracted an international and local law firms to represent it in the Capital Gains tax dispute in London and were dully paid a sum of US$10million and shs2billion, respectively and the case was won. It was no longer necessary for government to incur additional costs in quote “a token of appreciation” to officials that were already doing work they were (are) already assigned in their regular jobs with remunerations and other related benefits. This set bad precedent in a country where there are numerous public officials that have done honorable jobs, but have gone unnoticed or unappreciated such as teachers; nurses; doctors; prison officers; police officers; army officers and other public servants; where there are court awards that have not seen the light of day for many years; and where pensioners and their next of kin have remained unpaid for many years.
  5. This payment having been made at a time when the cost of living for many citizens is unbearable; when there is high inflation that has devalued many assets to the extent that people are not earning the true value of their assets; and when there is a widening political and economic divide between the haves and have-nots, is a miscalculation of the highest order.   

It is against this background that Water Governance Institute criticizes the Shs.6billion cash rewarded to public servants involved in the Heritage and Tullow Oil Capital Gains Tax Dispute Case. In this respect, the Executive Director of Water Governance Institute, Mr. Bazira Henry Mugisha was recently featured on an NTV “On the Spot program” where he expressed these concerns. Details to this TV talk-show can be found in the video below

It is disheartening to realize that even the Auditor General was aware of the shoddy Presidential Hand Shake and he seemed to sanction it[Read more].

Evidence that Auditor General was aware of the shoddy Presidential Hand Shake

Lawyers move to sue Commissioner General URA Mrs Akol. Firm behind court order barring debate on oil apologizes to Speaker Kadaga.