Business News By Leo Odera Omolo
THE Government will not tolerate foreign oil companies evading taxes, President Yoweri Museveni has warned,the government official mouthpiece the NEWVSION reported this morning.
In his first public criticism of the multinational oil companies operating in the Albertine Graben, Museveni emphasised that the companies had no option but to pay all taxes due to the Government.
“We have made it clear to the oil companies operating in Uganda that all the taxes due to the Government of Uganda must be paid. Also the other development programmes in the petroleum sector must be fulfilled,” he said, according to a statement from State House.
To make his point clear, the President also mocked pessimists who argue that oil could turn out to be a curse rather than a blessing, as it has been in many other African countries.
He asserted that oil has been a curse where weak African leaders have failed to check the “greed” of western companies.
This will not be allowed to happen in Uganda, the President told NRM delegates at the opening of the party’s second national conference at Namboole stadium on Saturday.
He cited the Canadian-owned, Heritage Oil Company, that is yet to pay $405m (about sh810b) to the Uganda Revenue Authority.
The company is contesting the tax on the sale of its stake in oil wells in western Uganda to Tullow Oil Company at $1.45b.
“Recently, we had a problem with some of the oil companies that were trying to refuse to pay our taxes,” he narrated.
“A company called Heritage spent $130m in exploration. When oil was found, they decided to sell their shares for which they received $1.45b – more than ten times what they spent. We required them to pay us 30% of this as tax. It translates into $430 million. They, however, refused to pay.”
The President reiterated that revenue from oil will be spent on developing infrastructure like roads, the energy sector, and build an excellent railway network.
The rest will be used to fund science, technology and research initiatives as well as innovation, he explained.
“The oil money will never be used for consumption,” said Museveni.
The Government has largely kept its contracts with the oil companies a secret but the tax row has exposed some of the transactions.
Last month, the Government repossessed the Kingfisher (Kajubirizi) discovery area, an oil field in Hoima, from Tullow Oil after the company failed to meet some of the set terms.
The blocks, 3A and 1, were jointly operated by Heritage and Tullow. However, when Heritage sold its interest to Tullow, the Government declined to recognise the transaction over non-payment of taxes.
In a letter, energy and mineral development minister Hillary Onek also said Tullow’s licence had expired.
“The period within which you are supposed to have applied for a petroleum production licence for the Kingfisher field expired in February 2010,” he told the Tullow managers.
The repossession meant that the Government can license another company. This puts Tullow at a risk of losing $1.45b, which it paid Heritage for the asset.
Meanwhile, speaking at the opening of the same delegates’ conference, the outgoing NRM secretary general, Amama Mbabazi, revealed that the party had elected 2.5 million people from the grassroots since it began the process in July.
Mbabazi promised that the party would provide mobile phones to its leaders to ease internal communication.
He regretted the malpractices in the primaries, but said the party had embarked on cadre identification, training and placement to ensure that only people with good political orientation form its future leadership.
Ends