Gov’t Foretells Fish Crisis over HIV/AIDS Scourge

Tullow Oil plc has announced its intentions to appeal against a ruling delivered Wednesday by Tax Appeals Tribunal (TAT) in Uganda ordering the oil firm to pay Uganda Tax Revenue Authority $407m (Shs1 trillion) as Capital Gains Tax (CGT), more about Chimp Corps report.

The tribunal which comprised Asa Mugenyi, visit George Wilson Mugerwa and Pius Bahemuka, recipe agreed that this the biggest case (in monetary terms), involving the largest transaction of US$ 2.9 billion, in the legal history of Uganda.


Following the completion of the farm-down of 66 percent of its assets in Uganda to CNOOC and Total in 2012, Tullow was issued with a CGT assessment by the Uganda Revenue Authority (URA) of approximately $472m.


Tullow paid 30 percent of the assessment (approximately $142m) as legally required to launch an appeal.


Tullow said the ruling from the TAT is lengthy and deals with a number of different issues and will therefore require significant further legal evaluation.



TAT ruled against Tullow on the key issue of the express tax exemption contained in the Production Sharing Agreement for Exploration Area 2 (EA2 PSA).


The TAT has calculated Tullow’s CGT liability for the farm-downs, including certain reliefs, to be $407m, of which $142m has already been paid by Tullow.


In a statement issued Wednesday evening, Tullow said it “believes that the amount already paid exceeds its liabilities in relation to CGT on EA1 and EA3A.”


However, the oil firm noted, “there are specific points in the ruling that Tullow may wish to challenge relating to these two Areas.


A specific CGT exemption was included in the EA2 PSA. Tullow is extremely disappointed that the TAT ruled that the then Minister of Energy did not have the legal authority to grant such an exemption.”


“Tullow believes that the TAT has erred in law and Tullow will challenge the EA2 assessment through the Ugandan courts and international arbitration but hopes that further direct negotiation with the Government can resolve this matter.


Tullow considers, based on external legal advice, that the international arbitration tribunal will award in its favour.”


Government submitted that Tullow are not entitled to the reinvestment relief because they did not reinvest the proceeds in an asset of a like kind and that the oil firm’s claim that they used the proceeds from the sale of the interests in the PSA to fund pre-existing costs is incorrect.


Government also insisted that Tullow by using the sales proceeds to fund their development obligations under the PSAs they were discharging pre-existing debt.


“This is not an asset of like kind acquired and there is no reinvestment at all. The respondent also argued that the applicant reinvestment was not made within one year of disposal,” government lawyers argued.


Court today ruled that the applicants were aware that they were required to pay taxes.




The Tribunal found that Article 23.5 of the EA2 PSA was intended to cover capital gains tax arising from the disposal of interests in the PSA.


It further ruled that Article 23.5 of the EA2 PSA is invalid under the tax laws of Uganda and therefore Tullow are not entitled to an exemption from the payment of capital gains tax.


The Tribunal also discovered that the applicants cannot rely on the principle of legitimate expectation as their expectation was not legitimate.


It was decided that the disposal of 16.67 percent of their interest by Tullow was involuntary and that the oil firm is entitled to a re-investment relief of up to 25 percent of the interests they disposed of.


The Tribunal also found that Tullow are still entitled to an extension of time to furnish evidence of re-investment in an asset of a like kind.


The hearing committee directed Tullow to pay capital gains tax of US$ 407,095,366 basing on the evidence adduced before the Tribunal being the amount after the pre-investment relief.


The total amount of capital gain tax before the pre-investment relief was US$ 542,793,821.


Tullow will deduct the statutory 30 percent paid from the US$ 407,095,366 and the balance outstanding shall attract an interest of 2 percent per month from the date of this ruling till payment in full.


Tullow are entitled to a re-investment relief of US$ 135,698,455.


The Tribunal ordered that the applicants pay two-thirds of the costs of this application to the respondent.


The tribunal said URA, in its collection of taxes, should not attempt to kill the hen that lays golden eggs or consider it as inappropriate or attempts at “manipulation of figures” when its assessments are challenged.




Commenting today, the oil firm’s Executive Director, Aidan Heavey, said Tullow is very concerned by this ruling which ignores a contractual term signed by a Government Minister in Uganda.


“Tullow is Uganda’s largest foreign investor and a major taxpayer. Over the last 10 years, Tullow has spent $2.8 billion in Uganda and discovered 1.7 billion barrels of oil. This money was spent by Tullow on the understanding that our contracts with the Government, which contained important incentives to invest that were vital at a time when no oil had been discovered in Uganda, would be honoured. We will now carefully consider all our options to robustly challenge this ruling.”
Ministry of Agriculture Animal Industry and Fisheries expressed concern on Wednesday over how such an unhealthy section of the population would manage to produce fish for the country.


This was during the Launch of a Report on HIV knowledge, sildenafil attitudes and practices of the fisher folk (Fishing Communities) in Uganda.


Recent surveys have indicated the HIV prevalence amongst fishing communities as going up to 35 percent compared to the national prevalence which currently stands at 7 percent.


The Ministry’s Head of Fisheries Department Mr Jackson Wadanya told reporters in Kampala on Tuesday that government’s short term and long term plans to enhance fish production for the rising population are being threatened by the unrelenting HIV scourge.


“Today, the fisher folk is producing about 450, 000 metric tons of fish annually, which must be multiplied severally to catch up with 100million strong population by 2040,” said Wadanya.


One of the strategies to achieve this has been bolstering fish farming, which currently contributes about 100,000 tons to the annual production.


However, Wadanya notes that with the virus rapidly eating into the human resource that would be growing the sector through aquaculture, the fish industry stands largely threatened.


“Our population is growing very fast. By 2018 we were anticipating to add at least another 300,000 tons to the annual production. But if 35 percent of the fisher folk are dropping off by the scourge, then the social economic ramifications are bent to be more serious.”



The escalating HIV/AIDS prevalence amongst fishing communities in Uganda has got Government officials questioning the country’s capacity to produce sufficient fish for the skyrocketing population in the near future.


Sadly, according Wadanya, government stands even less chances of arresting the skyrocketing HIV/AIDS rates in fishing communities, owing to among others their demographics.


He noted that most of Uganda’s lakes are shared by other countries, (Victoria, Albert and Edward) which make fishing activity cross-boundary overly interactive. This exposes fishers to infections but also makes them unavailable for HIV testing and counselling.


“As much our ministry and all the other ministries have been directed to mainstream HIV/AIDS, implementation still remains difficult because most of the fishing communities are unreachable.”



“Life there is lived in discrete communities, scattered across the shores and only accessible by water, which makes them extremely hard to reach.”

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