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URA boss Allen Kagina
Tullow Oil has said it very concerned by the ruling of The Tax Appeals Tribunal for it to pay 407 million Dollars or 1.06trillion Uganda Shillings to the Uganda Revenue Authority.
The ruling by The Tribunal stated that the Energy Minister had no power to award an exemption to Tullow Oil when they sold part of their licenses to Total and CNOOC back in 2012 at 2.9billion Dollars.
In a strongly worded statement issued after the ruling, Tullow said that The Tribunal had erred in law and that they would challenge the URA assessment through the “Ugandan courts and international courts.” The statement, with the aim of reassuring investors emphasizes that “international arbitration tribunal will award” in their favor.
Tullow disputes the assessment of URA and insists that it is only liable to pay taxes worth 143million Dollars when they sold to the current partners Total and CNOOC.
Aiden Harvey, Tullow’s Chief Executive Officer in the statement stated that considering they started oil exploration when no oil was discovered, it was entitled to some incentives from government. He also said that for incentives provided, it was important that government honors them.
“We will now consider all our options to robustly challenge this ruling,” Harvey says.
The exemption under contention is Exploration Area 2. In the PSA’s government negotiated with Tullow, they claim that the Minister of Energy had granted them income tax exemption. The PSAs remain confidential but with the latest Tribunal ruling, it has been stated that energy minister has no legal right to grant an exemption.
This is not the first time an oil company disputes the ruling of The Tribunal. Heritage Oil, is currently challenging the ruling by the Tribunal when it sold its assets to Tullow in 2010. The case is currently ongoing in the High Court, Commercial Division. Furthermore, Uganda is involved in yet another international arbitration session in London.
With the current intention to challenge the ruling by The Tribunal that means the 1trillion Uganda Shillings the taxman will be seeking to collect will not be available immediately.
