News Column

Hotel Tax Holidays, Free Land Anger MPs

February 16, 2014

Deo Walusimbi

Parliament's Public Accounts committe has summoned former Minister of Finance, Syda Bbumba and her successor Maria Kiwanuka to explain why tax waivers and incentives offered to foreign investors were extended beyond the stipulated period.

PAC resolved to summon the two on Wednesday after MPs failed to understand the rationale for extending the tax holidays to several foreign companies without the approval of the relevant organs.

The beneficiaries of the extension made by Bbumba include hotels built in the run- up to the 2007 Commonwealth Heads of Government Meeting, (Chogm). These include AYA hotel, which, according to the auditor general's report, received Shs 906m in tax waivers. Kingdom hotel and Southern Range Nyanza Ltd got Shs 25bn in waivers during the financial year 2010/2011.

Industries like the vegetable oil maker Bidco also benefited. Bidco's tax holiday was "extended to 25 years," the report shows. Sameer Agriculture and Livestock was handed a "10-year tax holiday" together with Roofings Ltd. These tax waivers also came with free land to the beneficiary companies.

"We just can't allow foreign companies to get tax holidays with free land to go ahead with businesses in Uganda when indigenous investors are crying foul over the exorbitant taxes being levied on them by Uganda Revenue Authority,"Bunyaruguru MP Benjamin Cadet said."Can you imagine that many hotels like AYA were given tax holidays on all building materials worth Shs 900m... ?"

Martin Muzaale, [Buzaaya] proposed that Bbumba and the current minister of Finance be invited before the committee, to explain these anomalies.

"We need the former-finance Minister Bbumba and the current minister in office to come here [in the committee] to explain the rationale for these tax holiday extensions because they had elapsed, then the minister went ahead to extend them and instead of rectifying this mistake, the current minister continued with it," he submitted, attracting an affirmative ruling from the committee's vice chairperson, Paul Mwiru.

The Auditor General's report notes that when Chogm ended, the Permanent secretary/Secretary to treasury wrote, to direct all accounting officers that "... no other incentives to be offered beyond December 2010."

However, the Finance ministry went ahead to offer tax waivers and rebates to hotels that were being constructed in 2011 and in 2012 in violation of the ministry's own "circular", causing financial loss to government.

In their attempt to defend the minister's decision, a delegation from the Finance ministry, led by Under Secretary Betty Kasimbaazi, said the "minister reviewed the policy and that on a case by case basis, extended the incentive for hotels that had just benefited and were still under construction."

Moses Kaggwa, the Finance ministry commissioner for tax policy, said: "It was in the minister's general powers and it was not illegal for the ministry to extend the incentives."

For more stories on investments and markets, please see HispanicBusiness' Finance Channel

Source: AllAfrica

Story Tools