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AG to MPs: Asking for ‘handshake’ refund is a punishment
On Thursday
last week, the committee on Commissions, Statutory Authorities and
State Enterprises (COSASE) presented its report after a two-month
investigation of the Shs 6 billion presidential handshake.
In its recommendations, the committee,
chaired by Abdu Katuntu (Bugweri), demanded that the 42 government
officials who benefitted from the bonus payment refund the money. OLIVE
EYOTARU followed debate on the report and brings you excerpts from the
proceedings.
Mwesigwa Rukutana (Deputy AG): I want to thank the chairperson of the committee for this detailed report. I am not taking the floor to challenge the veracity or recommendations of the report. However, I would like to note some slight contradictions which we should clear before debate.
Mwesigwa Rukutana (Deputy AG): I want to thank the chairperson of the committee for this detailed report. I am not taking the floor to challenge the veracity or recommendations of the report. However, I would like to note some slight contradictions which we should clear before debate.
In recommendation A, all funds paid out
of URA account to the beneficiaries of the handshake should be refunded.
Recommendation B is that all officers who flouted the law should be
held accountable and in this vein, the IGG should institute
investigations with the view to establish the culpability and possible
offences.
Now I find these two recommendations
rather contradictory. Suppose the IGG carries out investigations and
finds out that actually, the officers are not culpable or guilty yet you
have already condemned them to refund the money and to be held
accountable?
(Interruptions) Since it was a
considered view that further investigations are required, why don’t we
shelve all the other recommendations and uphold the recommendation that
the IGG should institute investigations. Ordering somebody to make a
refund is a punishment; you would have punished the person before he is
duly investigated.
It is not my intention to challenge the
veracity of the report but let’s be sober and say since more
investigations are required, let us not subject the officers to
punishment until the IGG carries out investigations...
Abdu Katuntu (Bugweri):
In circumstances like this, we need to discuss issues soberly and
without emotions. First of all, when the AG stood up, I expected him to
have read the Public Finance Management Act. If he did read, I am
surprised that he would raise that very issue.
Under the PFMA, sections 78, 79 and 80,
there are two liabilities that are created. Under 79, criminal offices
are created and when you look at our recommendations, we are talking
about possible criminal offences. The issue about refund, we have
clearly found out that the money was paid out contrary to the PFMA and
the URA Act. We are not asking the IGG to investigate that.
There is already a finding by us and
under the Act, if you have what we call refund, if you go by
kindergarten English, it is money which you receive when you are not
supposed to receive it or if you received more than what you were
supposed to receive and then you refund what is not yours.
However, in the process, the committee
notes that there are possibilities of criminal offences having been
committed. But we are not a prosecuting agency as a committee of
parliament. We have, therefore, referred that to the IGG. If the AG had
addressed himself to Sections 78, 79 and 80, I would be surprised he
would raise these issues.
Lastly, we have a conflict because the
president was in a dilemma on this. The offices that are supposed to
have advised him are the ones involved in this sort of thing. So, as you
also take the advice of the AG, we should also take that into
consideration.
Rukutuna: I have listened to the respectable, senior lawyer (point of procedure)
Katuntu: Hon Speaker,
we need guidance from you. Our rules of procedure do not allow a member
to speak on the same subject twice, except in a committee. Are we
proceeding correctly for the learned AG who should really know these
rules to speak on the same subject twice?
Kadaga: Since you had finished, you cannot come back...No (laughter).
David Abala (Ngora) (abridged): I want to refer to the bible. In Deuteronomy 20: 15, it says, “you shall not steal.” What I have seen is real theft of public funds by our officials. The officials ignored existing laws and procedures that are in place. You can imagine in URA they ignored the board and thought it was useless because they basically wanted money. I saw the real appetite for money during these meetings. They misled the president because of the real appetite for money.
David Abala (Ngora) (abridged): I want to refer to the bible. In Deuteronomy 20: 15, it says, “you shall not steal.” What I have seen is real theft of public funds by our officials. The officials ignored existing laws and procedures that are in place. You can imagine in URA they ignored the board and thought it was useless because they basically wanted money. I saw the real appetite for money during these meetings. They misled the president because of the real appetite for money.
If you look at this type of this thing,
it shows negligence of duty, like the AG which is supposed to follow the
$4 million. Up to date, that money is languishing outside this country
and yet we are crying that there is no money...I agree with the
recommendations that everyone whose name is mentioned here must be
brought to book. The money must be refunded as early as immediately...
Alex Ruhunda (Fort Portal municipality):
When you go through the report, you can see that actually this group of
individuals knew what they wanted and they were playing around with
every office to ensure they get their catch. To me, this cannot qualify
to be a reward.
We are not talking about civil servants
who are earning less. These are highly-paid and taking big
responsibilities for our country. For them to imagine, with all the
facilitation, you are talking about Shs 56 billion. We know what it
means in this package, if you are a careful person you can save
something big out of it. What is really hurting is that how can we have
in offices individuals of that character and yet from what has been
publicized over the years they are looked at as the most angelic?
Geoffrey Macho (Busia Municipality):
I don’t know...I really don’t know (laughter) where I can begin from.
The recommendations of the committee are very right and timely because I
see if we implement them; they will make the ruling NRM, which I belong
to, become stronger...I see the AG cheering and this is what we talked
about; conflict of interest. These are the problems we are facing in the
NRM government.
People who would have advised the
president are the people who are misadvising because of conflict of
interest and eating. My mentor keeps telling people that this is Kisanja
Hakuna Mchezo (term for no jokes) but we want to show Ugandans that
this is Kisanja Hakuna Kukula (term for no stealing) and, as a result, I
support the recommendation on basis that the image of Uganda must be
protected because most of the things we do shock the region and world at
large...these people must pay the money.
Denis Hamson Obua (Ajuri):
In my 11 years of uninterrupted service as an MP, let me say that this
report from Cosase is a landmark report. It is a report full of facts
which are based on evidence and I can emphatically say it is conclusive.
In fact, debating this report is so
difficult; it waters down the recommendations and findings of the
committee. I would propose that we have limited debate and conclude this
business. The report highlights the various provisions of the law which
were raped in broad day- light. From the Constitution to URA Act, PFMA,
to mention but a few, it highlights the political and legal wrongs
committed, including all the atrocities.
I find myself very constrained to debate
this report and I want to move that if the House could accept, maybe
after some limited debate and with the mood in the House...
Anna Adeke (National Female Youth):
I simply want to emphasize the moral fiber that the Shs 6 billion
handshake is slowly but surely degenerating. It is unfortunate that the
debate has come at a time where the public has pretty much settled on it
and they made a statement on it.
However, if you felt the level of public
outrage about the money that these individuals took, they were not in
any way entitled to receive that money for something within their job
descriptions. There are some young lawyers who were there reading the
documents, burning the midnight candle but did not appear on the list.
What are we showing them?
The rot in the civil service is terrible
and it is the top officials who are the top culprits of that rot...I
doubt that Doris Akol sat through the hours in the night to read these
documents...other people did the work and were not rewarded.
Gaster Mugoya (Bukooli North):
Most of these actions and omissions constitute what we call beaches
under the leadership code. The decision taken by the president was
bonafide and it is good. You came up with a chronology on analyzing
facts and applying the facts to the law. That was a systematic way of
bringing up the matter.
However, where you say that the decision
of the president was bonafide; I find a slight iota of contradiction
and auditor dictum, if he acted in good faith, honestly, openly,
sincerely and without deceit or fraud, without stimulation or pretense,
innocently in the attitude of trust and confidence, without notice of
fraud, then I find that a big problem. How are you going now to
criminalise the actions? (Point of clarification)
Odonga Otto (Aruu): I
am seeking clarification from my learned friend who is attempting to do a
very risky business (laughter). The committee chair just raised to the
House that Sections 71, 79 and 80 of the PFMA require that before you
spend public funds, there has to be a procedure for spending.
So, can you address your mind to the
law? Are you aware that there are statutory offences under the Act that
brings sanctions against those who do not comply with the law? What are
you talking about and where did you come from before you came here?
(laughter)
Mugoya: I am trained in
judicial matters and there is no specific formula when you are
analyzing a subject matter. It depends on the art when you are framing
your facts…
Mbwatekamwa Gaffa (Kasambya): This is the real time to act. Many of our government officials are so arrogant. If you read today’s paper, some of the beneficiaries were actually lamenting that they will not refund the funds; so, they are taking parliament for granted. They think we are toothless.
In fact we need to lead by example because one of the beneficiaries actually sits in this office of ours, Hon Slyvia Rwakoojo and hopefully she will be among the first beneficiaries to pay back.
Mbwatekamwa Gaffa (Kasambya): This is the real time to act. Many of our government officials are so arrogant. If you read today’s paper, some of the beneficiaries were actually lamenting that they will not refund the funds; so, they are taking parliament for granted. They think we are toothless.
In fact we need to lead by example because one of the beneficiaries actually sits in this office of ours, Hon Slyvia Rwakoojo and hopefully she will be among the first beneficiaries to pay back.
One of the beneficiaries, Chris Kassami,
died but I am of the view that if members cannot refund because the
direct beneficiary died, his properties should be sold and if he has no
property, the body should be exhumed and we can put on auction such that
we get back our money (prolonged laughter).
Kadaga: Hon Mbwa, I want to remind you that under the Public Health Act, it is an offence to interfere with the dead.
Odria Alioni (Aringa South): The president has so many presidential advisors and these fall in different sectors, whether financial or political. Out of all these advisors together with the AG, how could His Excellency go ahead and support such an illegal expenditure?
Kadaga: Hon Mbwa, I want to remind you that under the Public Health Act, it is an offence to interfere with the dead.
Odria Alioni (Aringa South): The president has so many presidential advisors and these fall in different sectors, whether financial or political. Out of all these advisors together with the AG, how could His Excellency go ahead and support such an illegal expenditure?
I would request that a recommendation be
made by the committee to the president that before such decisions are
taken, he must do extensive consultations. It is a shame. If such is to
continue, where is this country heading if all civil servants demand to
be ‘hand-shaken’ for the good jobs they do?
Ibrahim Kasozi (Makindye East):
I find it a bit perturbing that on several occasions, there is the
blame or excuse game from the side of the president. If you recall the
[Hassan] Basajjabalaba saga, the president was misled. When you come to
this one now, the president was also misled. Now, we are in a situation
where the president is being misled and the country is losing. Those
people, most of the beneficiaries, the government gave them scholarships
to study the oil and gas courses.
Allan Ssewanyana (Makindye West):
I would like to make a small amendment. According to the letter written
by Doris Akol to the president [asking for the handshake], it indicated
that they are going to buy plots of land to build houses or finish
their unfinished houses. These are all appreciating goods that make
profits.
When you take Shs 200 million from the
bank today, after 2 years, it would have made some Shs 15 million. So,
it would be very prudent and fair enough for these people not to return
the actual money given to them without interest. At least this would be
punishment enough because when you tell them to bring that money, it
won’t be a good example to other public servants who have been doing
such in arranging for themselves rewards in form of cash.
Silas Aogon (Kumi Municipality):
The office of the AG is so vital to this House. It is very unfortunate
that sometimes that office seems to abuse what it is supposed to be
doing by way of trying to block debate of such pertinent nature. It is
the right time as parliament to stamp our authority. Scientifically,
this is the litmus test that we must go through as the 10th Parliament.
If we don’t do the right thing, everybody will ignore us.
Therefore, whoever stands up to speak
should be firm and defend the Constitution. There are people who are
always undermining our committees because they get a lot of money in
crooked ways. They know we share our little money with our voters and,
therefore, what can we say to them? It should not be the president to
refund the money but those who misused the money and we should do
surveillance to make sure they don’t run to State House to get this
money.
Kenneth Lubogo (Bulamogi):
When you read this report, there is the external lawyer who was paid $8
million. The report does not give details on how much the external
lawyer contributed and if there is nothing much the lawyer contributed,
how much did we lose?
Matthias Mpuuga (Masaka Municipality):
The actions of the 9th Parliament are in part returning to haunt and
hound some of us who were there. This challenge today should really
bring us to reflection as to the need to amend the upstream and
downstream oil legislations to bring back the powers of parliament to
scrutinize all forms of agreements that relate to oil transactions. It
partly explains why the minister inadvertently signed an agreement she
had not read.
Secondly, I would like to imagine that
we have a government officer charged with recovering taxes. Why would we
have withholding tax not recovered? We would like to have a
recommendation clearly indicting the Solicitor General for failure to
recover withholding tax yet he paid the firm that handled that matter. I
would like to invite parliament to add a clear recommendation on
recovery of withholding tax and the IGG could interest herself in this.
This money could have been somehow collected. This is unprecedented.
Katuntu wraps up: You
may wish to sign these agreements but the problems that come with this
are many and Hon Syda Bbumba will not be the last one. As far as Hon
Bbumba, Hilary Onek and Daudi Migereko are concerned, we have suggested
that the IGG should take up all these matters.
If any of them is found to have breached
[the law] like we sort of see but didn’t go into detail, those people
should be brought to book. That goes from the public officers who were
involved in this handshake to the ministers who signed this profit
sharing agreement (PSA). Our meeting with the president was clear on who
has powers to waive the taxes and he did tell us that Hon Bbumba did it
without consultation…
Chief Whip Ruth Nankabirwa:
From the debates, it has been very clear that this matter needed to be
handled the way it has been handled; time for people to be heard, for
laws to be consulted, for everybody including the head of state to be
consulted…It is also clear that more time is needed for other agencies
to conclude what the committee has started.
For me, I have stood up here to say that
government has been present when the committee tabled its report in
this House and we have noted that more than 30 MPs have contributed and
none of them opposed what the committee has recommended. My role is to
carry the report with the recommendations to the leader of government
business and to ensure that the report is laid in cabinet.
Heritage Oil and Gas Limited (Heritage) and Tullow Uganda Limited (Tullow) were jointly licensed by the Government of Uganda (Government) for petroleum exploration, development and production in Exploration Areas 1 and 3A, in the Albertine Graben, with each having a participating interest of 50% in each of the said Exploration Areas.
On 26th January, 2010, Heritage entered into a Sale and Purchase Agreement (SPA) by which Heritage agreed to sell (transfer) to Tullow its 50% participating interest each of the said Exploration areas 1 and 3A.
By letter dated 2nd February, 2010, Heritage requested for consent for the said transfer of its interest in the said Exploration Areas from the Minister of Energy and Mineral Development in accordance with Section 44 of the Petroleum Exploration and Production Act (PEPA) Cap 150, Laws of Uganda.
By letter dated 6th July, 2010, the Minister gave a conditional consent to Heritage for the proposed transfer of interest subject to the following terms:
On 19th August, 2010 URA issued an additional tax assessment to Heritage in the amount of USD 30,000,000/= (herein referred to as “Second Assessment”) Heritage objected to the above assessments contending that the said transfer does not give rise to any tax liability under the Laws of Uganda. The Government of Uganda on the other hand strongly maintained that the said transaction is taxable under the laws of Uganda.
On 27th July, 2010, the URA issued an Agency Notice under Section 108(1) of the Income Tax Act (ITA) Cap 340 Laws of Uganda to Tullow, appointing Tullow as a Third Party Agent for purposes of collection of the aforementioned taxes payable by Heritage in respect of the First Assessment.
On 2nd December, 2010, the URA issued a further Agency Notice for purposes of collection the aforementioned taxes payable by Heritage in respect of the Second Assessment.
On 26th July, 2010, Tullow and Heritage purported to complete a Sale and Purchase Agreement transaction without the Government’s approval whereupon Tullow paid to Heritage USD 1,045,000,000/= in respect of the Heritage objected to the above assessments contending that the said transfer does not give rise to any tax liability under the Laws of Uganda. The Government of Uganda on the other hand strongly maintained that the said transaction is taxable under the laws of Uganda.
On 27th July, 2010, the URA issued an Agency Notice under Section 108(1) of the Income Tax Act (ITA) Cap 340 Laws of Uganda to Tullow, appointing Tullow as a Third Party Agent for purposes of collection of the aforementioned taxes payable by Heritage in respect of the First Assessment.
On 2nd December, 2010, the URA issued a further Agency Notice for purposes of collection the aforementioned taxes payable by Heritage in respect of the Second Assessment.
On 26th July, 2010, Tullow and Heritage purported to complete a Sale and Purchase Agreement transaction without the Government’s approval whereupon Tullow paid to Heritage USD 1,045,000,000/= in respect of the transfer. In addition, Heritage and Tullow deposited 30% of the taxes thereof, that is USD 121,477,500/= with URA in accordance with Section 103 (2) of the ITA and further deposited the balance of 70% of the taxes thereof (USD 283,447,500) in an Escrow Account held between Tullow and Heritage with Standard Chartered Bank of UK, without Government’s consent and approval.
On the failure by Heritage to pay taxes on the First Assessment in full, Government by letter to Heritage dated 3rd August, 2010, stated that the conditions set out in the letter of 6th July, 2010 had not been met and therefore, the conditional consent had not become effective. Consequently, the said transfer between Heritage and Tullow was of no legal effect or consequence under section 44 of the PEPA.
On the failure by Heritage to pay taxes on the First Assessment in full, Government by letter to Heritage dated 3rd August, 2010 stated that the conditions set out in the letter of 6th July, 2020 had not been met and therefore, the said transfer between Heritage and Tullow was of no legal effect or consequence under section 44 of the PEPA.
Arising from the above, Tullow could not legally acquire Heritage’s 50% participating interest. This prompted Tullow to enter into negotiations with Government whereupon, under the Memorandum of Understanding dated 15th March, 2011 between the Government and URA on the one part and Tullow and Tullow Uganda Operations Pty Ltd, Tullow undertook to pay USD 313,447,500/= being the balance of the assessed taxes payable by Heritage on the said transaction, on the strength of the Agency Notices issued by URA to Tullow on the First and Second Assessments.
By letters dated 1st October, 2010 and 18th August, 2010 to URA, Heritage, in accordance with section 99(1) of the ITA objected to the First and Second tax Assessment respectively.
The Commissioner General of URA issued the Objection Decisions to Heritage in respect of the First and Second Assessment by letters dated 1st November, 2010 and 1st December 2010 respectively, in accordance with Section 99(5) of the ITA.
Consequently, in accordance with Section 100(1) (b) of the ITA, Heritage lodged an application for review of the taxation decision before the Tax Appeals Tribunal in Uganda. The Tax Appeals Tribunal ruled in favour of URA and subsequently Heritage filed appeals in the High Court of Uganda.
In total disregard of the on-going dispute proceedings in the Tax Appeals Tribunal, Heritage wrote two letters requesting for re-negotiation of the PSAs and further served two Notices of Arbitration to the Government in respect of the same tax dispute. (The letters and Notices of Arbitration are attached hereto).
The Government studied Heritage’s claim, found no merit and totally rejected them.
Arising from the foregoing, a need arose to engage External Legal counsel to give support to Uganda Revenue Authority Legal Team in the execution of the Civil Appeal proceedings.
The Tax Appeals Tribunal
HOGL appealed the taxation in the Tax Appeals Tribunal (TAT) in accordance with the laws of Uganda in 2010. The TAT proceedings involved vigorous processes but Government.
After initiating tax appeals in the TAT and while these appeals were ongoing, on 16thMay 2011, HOGL initiated arbitration proceedings in London against government by filing two notices of arbitration (the “Notices of Arbitration”).
The Notices of Arbitration were filed in accordance with Article 3 of the United Nations Commission for International Trade Law Arbitration Rules, 1976 (the “UNCITRAL Arbitration Rules”). HOGL initiated the arbitration on the basis of the arbitrations agreements contained in the two PSAs.
The Government of Uganda acquired the services of the top international arbitration lawyer in the world, George Kahale III practicing with the firm of Curtis Mallet – Prevost Colt and Mosle LLP chambers , one of the oldest law firms in the world established in 1894.
The aftermath
ChimpReports has learned that after emerging victorious in the CGT case, URA made huge payments to government lawyers and other staff who participated in the legal battle against Tullow.
Officials said had the Ugandan government not taken aggressive steps; it would have missed millions of dollars in capital gains tax.
It is also reported that Tullow associates tried to bribe then URA boss Allen Kagina to ignore the tax but angrily turned down the offer before reporting the matter to the president.
However, questions are being asked about who authorised the questionable payments and what criterion was used in their disbursement to government officials.
According to URA’s monthly payroll of August 2016, the tax body’s Chief Executive Doris Akol received Shs 242m as a reward for winning the case.
On the same payroll, Akol received Shs 40m (gross) as her monthly salary.
Therefore in one month, Akol went home with a staggering Shs 282m (before taxes).
All the figures mentioned in this story reflect amounts of money the officials received before taxes or other deductions were subtracted.
Akol led URA’s legal department that managed the capital gains tax case before being appointed by the president to run the tax collection body.
The former Permanent Secretary in the Ministry of Energy and Mineral Development, Kabagambe Kaliisa bagged Shs 133m.
The then Deputy Attorney General, Fred Ruhindi received Shs 93m.
Interestingly, Shs 393m was wired on the bank account of former Permanent Secretary Finance Ministry, Chris Kassami after he had passed on.
Contacted, Akol asked ChimpReports to obtain a clarification from the URA spokesperson Sarah Banage.
Banage confirmed that indeed the tax body effected payments after the capital gains tax was won.
“Yes, it’s true, we paid some people basing on a directive from the Attorney General,” said Banage.
Asked what criterion was used to make the disbursements, Banage answered: “Everything was based on a directive from the Attorney General. You need to talk to his office. They have all the details.”
We telephoned Attorney General, William Byaruhanga at the end of 2016 but said he was in Hague.
He promised to follow up the matter on return to Uganda.
Efforts to obtain clarification from were yet to bear fruit as he fell short of responding to our telephone calls.
On the list of the paid government officials is the current Finance Ministry Permanent Secretary Keith Muhakanizi who received Shs 108m.
Former Attorney General Peter Nyombi received Shs 226m.
Lawrence Kiiza, a senior official in the Ministry of Finance was paid Shs 102m while Martin Mwambutsya, a Senior Attorney in the Ministry of Justice and Constitutional Affairs took home Shs 232m.
Ernest Rubondo, who heads the Directorate of the Petroleum Authority of Uganda, received Shs 266m.
Solicitor General, Francis Atoke was given Shs 234m while URA lawyer, Ali Ssekatawa got Shs 242m.
The Director of Legal Affairs at the Solicitor General’s office, Christopher Gashirabake, got Shs 242m.
Honey Malinga, who served as Vice Director of the Petroleum Exploration & Production Department (PEPD), was handed Shs 262m.
Moses Kaggwa, a Member Commissioner for Tax Policy Ministry of Finance, got Shs 234m.
Moses Kibumba, a private tax expert having formerly worked with URA for 21 years as a tax auditor, received Shs 93m.
Moses Kajubi who was serving as URA Commissioner, Domestic Taxes, got Shs 226m.
Peter Muliisa, a URA lawyer with a masters in Petroleum Taxation and Finance, was paid Shs 234m.
Rodney Golooba and Samuel Kahima, all lawyers with URA, received Shs 222m and Shs 224m respectively.
Harriet Lwabi Musoke, a senior official at Ministry of Justice and Constitutional Affairs, bagged Shs 242m while Harriet Tukamushaba who works in the same office received Shs 99m.
KCCA Director Jenifer Musisi, who had previously served as head of the legal department at URA, was given Shs 121m.
Robinah Nakakawa, a commissioner at URA, took home Shs 242m while Elizabeth Nakkungu of the Justice Ministry received Shs 238m.
Principal State Attorney George Kallemera got Shs 232M.
Others are Syson Ainembabazi of URA legal department (Shs216m), Assistant Commissioner Tax Investigations, Irene Bashabe Kyomuhendo (Shs 210m) and URA Manager Customs Audit, Agnes Nabwire.
Questions government must answer
1. Why would government officials paid handsomely to defend the people’s interests reward themselves with huge sums of money for doing the work they are paid for?
2. If indeed the money was meant to reward and motivate staff, what criterion was used to make the payments?
3. If the decision to reward these officials was administrative, how come doctors or government soldiers who save lives on a daily basis do not receive bonuses?
4. If these payments were in good faith, why wouldn’t URA and Attorney General’s office share this information with the public in the spirit of accountability?
URA Lawyers, Big Shots Reward Themselves with Shs 6bn
after Winning Oil Case
Giles Muhame
January 2, 2017
Uganda Revenue Authority (URA) made payments of over Shs 6bn to high ranking
government officials in different ministries as a reward (akasiimo) for winning
the Capital Gains Tax (CGT) case against Heritage.Heritage Oil and Gas Limited (Heritage) and Tullow Uganda Limited (Tullow) were jointly licensed by the Government of Uganda (Government) for petroleum exploration, development and production in Exploration Areas 1 and 3A, in the Albertine Graben, with each having a participating interest of 50% in each of the said Exploration Areas.
On 26th January, 2010, Heritage entered into a Sale and Purchase Agreement (SPA) by which Heritage agreed to sell (transfer) to Tullow its 50% participating interest each of the said Exploration areas 1 and 3A.
By letter dated 2nd February, 2010, Heritage requested for consent for the said transfer of its interest in the said Exploration Areas from the Minister of Energy and Mineral Development in accordance with Section 44 of the Petroleum Exploration and Production Act (PEPA) Cap 150, Laws of Uganda.
By letter dated 6th July, 2010, the Minister gave a conditional consent to Heritage for the proposed transfer of interest subject to the following terms:
- “Upon closure of the transaction, Heritage shall pay all taxes accruing from the transaction as shall be assessed by the Commissioner; Uganda Revenue Authority; and
- For the avoidance of doubt, the approval shall not become effective unless Heritage has paid all taxes or demonstrated to the satisfaction of the Government of Uganda and that the said taxes shall be paid immediately upon demand.
On 19th August, 2010 URA issued an additional tax assessment to Heritage in the amount of USD 30,000,000/= (herein referred to as “Second Assessment”) Heritage objected to the above assessments contending that the said transfer does not give rise to any tax liability under the Laws of Uganda. The Government of Uganda on the other hand strongly maintained that the said transaction is taxable under the laws of Uganda.
On 27th July, 2010, the URA issued an Agency Notice under Section 108(1) of the Income Tax Act (ITA) Cap 340 Laws of Uganda to Tullow, appointing Tullow as a Third Party Agent for purposes of collection of the aforementioned taxes payable by Heritage in respect of the First Assessment.
On 2nd December, 2010, the URA issued a further Agency Notice for purposes of collection the aforementioned taxes payable by Heritage in respect of the Second Assessment.
On 26th July, 2010, Tullow and Heritage purported to complete a Sale and Purchase Agreement transaction without the Government’s approval whereupon Tullow paid to Heritage USD 1,045,000,000/= in respect of the Heritage objected to the above assessments contending that the said transfer does not give rise to any tax liability under the Laws of Uganda. The Government of Uganda on the other hand strongly maintained that the said transaction is taxable under the laws of Uganda.
On 27th July, 2010, the URA issued an Agency Notice under Section 108(1) of the Income Tax Act (ITA) Cap 340 Laws of Uganda to Tullow, appointing Tullow as a Third Party Agent for purposes of collection of the aforementioned taxes payable by Heritage in respect of the First Assessment.
On 2nd December, 2010, the URA issued a further Agency Notice for purposes of collection the aforementioned taxes payable by Heritage in respect of the Second Assessment.
On 26th July, 2010, Tullow and Heritage purported to complete a Sale and Purchase Agreement transaction without the Government’s approval whereupon Tullow paid to Heritage USD 1,045,000,000/= in respect of the transfer. In addition, Heritage and Tullow deposited 30% of the taxes thereof, that is USD 121,477,500/= with URA in accordance with Section 103 (2) of the ITA and further deposited the balance of 70% of the taxes thereof (USD 283,447,500) in an Escrow Account held between Tullow and Heritage with Standard Chartered Bank of UK, without Government’s consent and approval.
On the failure by Heritage to pay taxes on the First Assessment in full, Government by letter to Heritage dated 3rd August, 2010, stated that the conditions set out in the letter of 6th July, 2010 had not been met and therefore, the conditional consent had not become effective. Consequently, the said transfer between Heritage and Tullow was of no legal effect or consequence under section 44 of the PEPA.
On the failure by Heritage to pay taxes on the First Assessment in full, Government by letter to Heritage dated 3rd August, 2010 stated that the conditions set out in the letter of 6th July, 2020 had not been met and therefore, the said transfer between Heritage and Tullow was of no legal effect or consequence under section 44 of the PEPA.
Arising from the above, Tullow could not legally acquire Heritage’s 50% participating interest. This prompted Tullow to enter into negotiations with Government whereupon, under the Memorandum of Understanding dated 15th March, 2011 between the Government and URA on the one part and Tullow and Tullow Uganda Operations Pty Ltd, Tullow undertook to pay USD 313,447,500/= being the balance of the assessed taxes payable by Heritage on the said transaction, on the strength of the Agency Notices issued by URA to Tullow on the First and Second Assessments.
By letters dated 1st October, 2010 and 18th August, 2010 to URA, Heritage, in accordance with section 99(1) of the ITA objected to the First and Second tax Assessment respectively.
The Commissioner General of URA issued the Objection Decisions to Heritage in respect of the First and Second Assessment by letters dated 1st November, 2010 and 1st December 2010 respectively, in accordance with Section 99(5) of the ITA.
Consequently, in accordance with Section 100(1) (b) of the ITA, Heritage lodged an application for review of the taxation decision before the Tax Appeals Tribunal in Uganda. The Tax Appeals Tribunal ruled in favour of URA and subsequently Heritage filed appeals in the High Court of Uganda.
In total disregard of the on-going dispute proceedings in the Tax Appeals Tribunal, Heritage wrote two letters requesting for re-negotiation of the PSAs and further served two Notices of Arbitration to the Government in respect of the same tax dispute. (The letters and Notices of Arbitration are attached hereto).
The Government studied Heritage’s claim, found no merit and totally rejected them.
Arising from the foregoing, a need arose to engage External Legal counsel to give support to Uganda Revenue Authority Legal Team in the execution of the Civil Appeal proceedings.
The Tax Appeals Tribunal
HOGL appealed the taxation in the Tax Appeals Tribunal (TAT) in accordance with the laws of Uganda in 2010. The TAT proceedings involved vigorous processes but Government.
After initiating tax appeals in the TAT and while these appeals were ongoing, on 16thMay 2011, HOGL initiated arbitration proceedings in London against government by filing two notices of arbitration (the “Notices of Arbitration”).
The Notices of Arbitration were filed in accordance with Article 3 of the United Nations Commission for International Trade Law Arbitration Rules, 1976 (the “UNCITRAL Arbitration Rules”). HOGL initiated the arbitration on the basis of the arbitrations agreements contained in the two PSAs.
The Government of Uganda acquired the services of the top international arbitration lawyer in the world, George Kahale III practicing with the firm of Curtis Mallet – Prevost Colt and Mosle LLP chambers , one of the oldest law firms in the world established in 1894.
The aftermath
ChimpReports has learned that after emerging victorious in the CGT case, URA made huge payments to government lawyers and other staff who participated in the legal battle against Tullow.
Officials said had the Ugandan government not taken aggressive steps; it would have missed millions of dollars in capital gains tax.
It is also reported that Tullow associates tried to bribe then URA boss Allen Kagina to ignore the tax but angrily turned down the offer before reporting the matter to the president.
However, questions are being asked about who authorised the questionable payments and what criterion was used in their disbursement to government officials.
According to URA’s monthly payroll of August 2016, the tax body’s Chief Executive Doris Akol received Shs 242m as a reward for winning the case.
On the same payroll, Akol received Shs 40m (gross) as her monthly salary.
Therefore in one month, Akol went home with a staggering Shs 282m (before taxes).
All the figures mentioned in this story reflect amounts of money the officials received before taxes or other deductions were subtracted.
Akol led URA’s legal department that managed the capital gains tax case before being appointed by the president to run the tax collection body.
The former Permanent Secretary in the Ministry of Energy and Mineral Development, Kabagambe Kaliisa bagged Shs 133m.
The then Deputy Attorney General, Fred Ruhindi received Shs 93m.
Interestingly, Shs 393m was wired on the bank account of former Permanent Secretary Finance Ministry, Chris Kassami after he had passed on.
Contacted, Akol asked ChimpReports to obtain a clarification from the URA spokesperson Sarah Banage.
Banage confirmed that indeed the tax body effected payments after the capital gains tax was won.
“Yes, it’s true, we paid some people basing on a directive from the Attorney General,” said Banage.
Asked what criterion was used to make the disbursements, Banage answered: “Everything was based on a directive from the Attorney General. You need to talk to his office. They have all the details.”
We telephoned Attorney General, William Byaruhanga at the end of 2016 but said he was in Hague.
He promised to follow up the matter on return to Uganda.
Efforts to obtain clarification from were yet to bear fruit as he fell short of responding to our telephone calls.
On the list of the paid government officials is the current Finance Ministry Permanent Secretary Keith Muhakanizi who received Shs 108m.
Former Attorney General Peter Nyombi received Shs 226m.
Lawrence Kiiza, a senior official in the Ministry of Finance was paid Shs 102m while Martin Mwambutsya, a Senior Attorney in the Ministry of Justice and Constitutional Affairs took home Shs 232m.
Ernest Rubondo, who heads the Directorate of the Petroleum Authority of Uganda, received Shs 266m.
Solicitor General, Francis Atoke was given Shs 234m while URA lawyer, Ali Ssekatawa got Shs 242m.
The Director of Legal Affairs at the Solicitor General’s office, Christopher Gashirabake, got Shs 242m.
Honey Malinga, who served as Vice Director of the Petroleum Exploration & Production Department (PEPD), was handed Shs 262m.
Moses Kaggwa, a Member Commissioner for Tax Policy Ministry of Finance, got Shs 234m.
Moses Kibumba, a private tax expert having formerly worked with URA for 21 years as a tax auditor, received Shs 93m.
Moses Kajubi who was serving as URA Commissioner, Domestic Taxes, got Shs 226m.
Peter Muliisa, a URA lawyer with a masters in Petroleum Taxation and Finance, was paid Shs 234m.
Rodney Golooba and Samuel Kahima, all lawyers with URA, received Shs 222m and Shs 224m respectively.
Harriet Lwabi Musoke, a senior official at Ministry of Justice and Constitutional Affairs, bagged Shs 242m while Harriet Tukamushaba who works in the same office received Shs 99m.
KCCA Director Jenifer Musisi, who had previously served as head of the legal department at URA, was given Shs 121m.
Robinah Nakakawa, a commissioner at URA, took home Shs 242m while Elizabeth Nakkungu of the Justice Ministry received Shs 238m.
Principal State Attorney George Kallemera got Shs 232M.
Others are Syson Ainembabazi of URA legal department (Shs216m), Assistant Commissioner Tax Investigations, Irene Bashabe Kyomuhendo (Shs 210m) and URA Manager Customs Audit, Agnes Nabwire.
Questions government must answer
1. Why would government officials paid handsomely to defend the people’s interests reward themselves with huge sums of money for doing the work they are paid for?
2. If indeed the money was meant to reward and motivate staff, what criterion was used to make the payments?
3. If the decision to reward these officials was administrative, how come doctors or government soldiers who save lives on a daily basis do not receive bonuses?
4. If these payments were in good faith, why wouldn’t URA and Attorney General’s office share this information with the public in the spirit of accountability?
Note: This story has been slightly
edited to reflect the actual figure of the bonuses as Shs 6bn not Shs 7bn as
earlier indicated and more background information about the Heritage case has
been added – ED.
Handshake Scandal: “I was Paid Shs 30m Bonus for Photocopying”
Sam Waswa
February 8th, 2017
Members of Parliament this morning heard that
some of the Uganda Revenue Authority (URA) officials who benefited from the Shs
6billion shillings Presidential Handshake did not do any extraordinary
work to deserve their share.
The Committee on Statutory Authorities and State Enterprises today met with another group of URA
officials who were quizzed on their exact participation in the tax arbitration cases in which Uganda
won over $700million in tax arrears
from Oil companies Tullow and
Heritage.
One of the officials Joseph Angulla when tasked
to explain his contributions
in the cases he admitted that the work he did for the case which involved
mainly filing documents, was no different from his usual job description.
Mr. Angulla who at the time of the cases was
serving at URA’s Clerical officer and the custodian of all the documents
regarding the oil case was paid Shs 29million in the handshake deal. His normal
monthly salary from URA he said was Shs 2.3million.
“I don’t want to insinuate that I was under
duress while working on oil case, I but only worked diligently,” he said.
He also pointed out that he never travelled to
the International Court of Arbitration in London.
Meanwhile the committee members were astounded by
another URA official Paul Ojambo who said he shared Shs 29.5million shillings
of the bonuses, just for photocopying documents for the case.
Asked by the committee Chairman Hon Abdu Katuntu
on what extraordinary work he did for the case, Ojambo said he used to
photocopy documents and work extra hours (beyond 5pm.)
His work he said mainly entailed serving documents,
and keeping documents confidentially.
But when pressed on whether he had ever worked
late at URA before the oil tax case, he responded in the affirmative, and also
confirmed that he had never been paid extra for working late.
Another official Remmy Golooba who was working as
a URA lawyer and was paid
133million shillings told the MPs that he didn’t think he deserved that much.
He told the MPs, “Not all rewards merit. I may
not have deserved it.”
The committee chair Katuntu
adjourned the meeting to Friday this week where officials from the Ministry of
Energy are expected.
