Uganda: Suspension of Oil-Related Activities Cost Govt Shs21.2b

Suspension and scale down of oil related activities in the 2019/20 financial year cost government Shs21.25b in taxable revenue, according to Accountant General Lawrence Semakula.

In September 2019 Total E&P suspended all oil related activities, especially on the $3.5b crude export pipeline from Uganda to Tanzania, which plunged the entire oil sector into a near shutdown for close to a year.

The pipeline, and other activities, had been suspended after negotiation for Total E&P to buy out the Tullow Oil stake collapsed over tax disagreements.

However, the suspensions have since been lifted with activity in the oil sector buzzing again, amid an expected announcement for Final Investment Decision.

The suspension, according to Mr Semakula, saw government only earn Shs35.5b for the financial year ended June 30, 2020 compared to Shs56.7b that was collected in the same period in the 2019/18 financial year.

This the Accountant General said represented a decline of 41.8 per cent.

Tax related revenue, including Income Tax, Value Added Tax and Withholding Tax, during the period dropped to just Shs29.7b compared to Shs51b in the previous period.

Non tax revenue earned from, especially surface rental, training fees and sale of bid documents, however, increased slightly from Shs5.7b compared to Shs5.67b, which represented an increase of 2 per cent due to entry of new oil companies, among which included Petro Afrik and KFD during the 2020/19 financial year.

Oil related taxes during the period contributed 84 per cent of the total collected revenues while other revenue sources contributed 16 per cent.

In the last three years, according to the Accountant General, the collections to the Petroleum Fund have been unstable, standing at Shs62.9b in June 2018, before declining slightly to Shs56.7b in June 2019. However, by June 2020 the decline grew further widening by almost a half to Shs35.5b.

During the period, according to Mr Semakula, government transferred Shs255b to the Consolidated Fund to support the budget while Shs1.35b was incurred on bank charges.

The Fund also incurred foreign exchange losses, which stood at Shs3.26b at the closing period of June 30, 2020.

During the period, the value of the Fund fell to Shs88.3b compared to Shs311.1b as of June 30, 2019 due to withdrawal of Shs255b for budget support.

Since 2015, at least Shs669.6b has been deposited in the Petroleum Fund of which, Shs580b has been transferred to the consolidated fund for budget support.

In his report, Mr Semakula also reported that at least Shs555.7m, which had been collected by Uganda Revenue Authority, had not been remitted to the Fund by the time of reporting.

Auditor General's advice

In the audit report for the period ended June 2020, Auditor General John Muwanga emphasised that it was important that government ensures that oil and gas-related revenues are used to achieve equitable, sustainable and value oriented national development.

He further noted that in using money from the Petroleum Fund, government should always adhere to the law provided under the Public Finance Management Act, which provides guidance on withdrawals from the Petroleum Fund to support the budget.

Source: The Monitor

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