• Mon. Dec 4th, 2023

Government Losses Billions of Dollars in Taxes for Failing to Obtain Promised land for Oil Refinery Company

UGANDA, Sango Bay Real Muloodi News | Government had pledged to provide Oil Refinery Company with 26,500 hectares of land. However, 10,000 hectares of the pledged land has not been provided, according to the Auditor General.

The Auditor-General further explains that the government’s failure to supply the land to Oil Refinery Company, has led to huge tax write-offs and losses.

According to the Auditor General’s report for the fiscal year ending June 20, 2021, the government negotiated with Oil Refinery Company in April 2003 to expand and strengthen Uganda’s oil palm sector.

The government was expected to supply 26,500 hectares of land under the arrangement but failed to meet its contractual obligations, resulting in huge tax write-offs.

“… government has breached the contract by failing to provide the balance of the 10,000 hectares of land as agreed. There is no documentation to show that the Ministry [of Finance] has made any follow-up on this matter,” Auditor General John Muwanga noted in his report.

According to the report, the government was obligated in the agreement to pay value-added tax on the goods of all enterprises envisioned under the project beginning with the first year of project activity and terminating 11 years after turning over the 26,500 hectares of land.

The company would subsequently return the value-added tax paid by the government with interest over eight years in eight equal payments, including accumulated interest beginning in the twelfth year, according to the report.

However, due to government’s failure to deliver the balance of the required land, the Ministry of Finance has continued to settle all tax obligations on behalf of the company. This resulted in a write-off of arrears worth Shs194b in the 2019/20 financial year, and a further write-off of accumulated arrears worth Shs79.8b in the year under audit (2020/21).

Therefore, Mr Muwanga concluded that: “Under the circumstances, it is apparent that instead of paying for 11 years, government has so far paid for 17 years and is still continuing, while chances of recovery appear to be slim.”

However, the Ministry of Finance explained in the Auditor General’s report that the government had donated extra land in Sango Bay, increasing the total acreage offered to 22,500 hectares.

The Ministry of Agriculture is helping to get the remaining 4,000 hectares, with the company promising to begin refunding unpaid taxes once the land has been secured.

According to the report, the Ministry of Finance also wrote to the Attorney General, requesting guidance on how to change the agreement to address questions identified in audit reports.

Mr Muwanga, on the other hand, has requested the Ministry of Finance to work with relevant authorities and ministries to resolve the land issue as soon as possible.

Accumulation of Tax Arrears

The Auditor-General also voiced concern about the government’s continuing tax arrears. According to the research, a total of USh212.7 billion in tax arrears had accrued as of June 30, 2021, which continues to undermine the Uganda Revenue Authority’s revenue collection efforts.

According to the report, the Ministry of Finance wrote-off USh809.7 billion in tax arrears for various projects for the year ending June 2019.


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