Ugandan Sues Tullow Over Tax Exemptions
Weeks after it effectively ended it operations in Uganda by selling off its interests in the oil-rich Lake Albert to Total at $575m (about Shs2.1 trillion), Tullow has been served with an intention to sue notice by a Ugandan citizen, who accuses the company of failing to pay taxes accruing to $1.1 billion (about Shs4.7 trillion).
Jackson Wabyona, through Nyanzi, Kiboneka and Mbabazi advocates, says Tullow Uganda Limited and its affiliate company Tullow Operations Pty Limited, on June 18, 2015, while in the United Kingdom, ostensibly executed a settlement agreement, with officials from both the Ugandan government and Uganda Revenue Authority (URA), the tax collecting body, which has all the hallmarks of corruption.
The standoff started in 2011, when Tullow Uganda Limited and Tullow Operations Pty Ltd filed an application before the Tax Appeals Tribunal challenging initial assessments of income tax of $472.7m (Shs1.8 trillion) by URA in respect of a transfer of their interests in exploration areas EA1, EA2 and EA3 to China National Offshore Oil Corporation (Cnooc) and Total at the cost of $2.9b (about Shs11 trillion).
The assessments were ultimately revised by URA to $467.2m as being capital gains tax. Tullow Uganda Limited and Tullow Operations Pty Limited appealed the assessment at the tax tribunal.
In 2014, the tribunal, chaired by Asa Mugenyi, ordered Tullow Uganda and Tullow Operations Pty Ltd to pay capital gains tax of $407m (Shs1.5trillion) based on the evidence provided before the tribunal as being the amount after the pre-investment relief.
The total amount of capital gains tax before the pre-investment relief was $542.7m (Shs2 trillion). Tullow Uganda appealed the decision of the tribunal in the Commercial Court, which resulted into an out-of-court settlement.
In his seven-page notice, Wabyona says the agreement was under the following terms; that Tullow’s tax liability of $407.1m (Shs1.5 trillion) would be fully satisfied and settled through payment of $250m (about Shs943b) and accordingly would be released and discharged from the tax Liability and any equivalent liability in respect of the gains arising to Tullow from the $ 2,933,330,400 (Shs11.1 trillion) farm-downs and Tullows’ appeal against the Tax Appeals Tribunal’s ( TAT) decision upholding its tax liability and assessment at $407m (Shs1.5 trillion) would be compromised and settled at $250m.
As a Ugandan gifted with the duty to protect and preserve public property, combat corruption and misuse of public property, Wabyona says he is aggrieved by the contents of the aforementioned settlement agreement.
“The settlement lacks and has no or any consideration in whatever form given to and received by the government of Uganda nor URA as the collectors, trustees and custodians of Uganda people’s tax revenue. As you are fully aware, the government of Uganda and URA purported to waive off and forfeit approximately $157m (Shs592b) of taxes payable by yourselves. You did not pay any consideration in whatever form for the waiver and forfeiture. On that account, the settlement agreement is a nullity, void and illegal,” Wabyona states in a notice served to the URA Attorney General’s chambers, Commissioner General and the chairman of Uganda Parliamentary Accounts Committee.
The intent and effect of the settlement, Wabyona says, was to circumvent the decision in application Number 4 of 2011, and pervert justice through compromising the decision of a lawful Tribunal (TAT) and substituting it with the desires and affection of the signatories in the form of a settlement imposed on the people of Uganda.
“This is illegal and unlawful in as far as it is contrary to public policy and the established principle or doctrine of precedent. Parties cannot consent to reverse a judgment of a competent tribunal or court. It is noteworthy that by executing the Settlement Agreement, you reversed and/or varied the TAT decision in Application No. 4 of 2011, through the agreement of the parties.”
“Civil Appeal No. 19 of 2014 was on issues of law that could not be a subject of consent or compromise between the signatories to the Settlement agreeing to state the law by agreement or otherwise acting outside the law and altering a statute,” he says, adding that only the Commercial Court and the appellate court have the jurisdiction to reverse a decision of the Court or Tribunal below and in this instance the Tax Appeals Tribunal after hearing the appeal and reaching a decision on the issues of law presented before it by the parties.
Wabyona adds that the execution, signature and endorsement of the settlement agreement by the Attorney General and Solicitor General representing the government on one hand, and the Commissioner General representing URA) on the other, was arbitrary, illegal and unlawful or ultra vires the Constitution, Uganda Revenue Authority Act, the Income Tax Act and the Tax Appeals Tribunal Act.
“The signatories to the Settlement Agreement had no or any mandate to execute, sign or endorse such a settlement that had the effect of waiving or varying the taxes imposed by the law on Tullow Uganda and were found due and payable to the Consolidated Fund by the duly authorised and mandated bodies under the laws of Uganda,” Wabyona says.
The notice was dispatched by Constantine Partasides, Helen Buchanan and David Hesse, who advised on the form, content and terms of the settlement, coupled with witnessing the same being executed.
Though the trio provided legal knowledge, Wabyona says they did so without relevant knowledge of and expertise in the appropriate laws of Uganda. He warns that action for personal liability and professional negligence shall be commenced against the lawyers for the illegalities committed through the preparation and execution of such a settlement agreement.
He adds that the lawyers, who are based in the UK, in cahoots with their clients colluded and connived with the Ugandan officials to commit arbitrary and illegal acts to cheat Ugandans of their taxes through the execution of the Settlement in question.
Wabyona says he is ready to rethink his decision to go to court if Tullow discloses the initial proposal from either party to settle Civil Appeal Number 19 of 2014, response and subsequent communication negotiating the intended settlement, URA management decision advising on settlement, URA Board Resolution authorising the settlement and approving the settlement amount of $ 250m in full and final settlement, notification of the Minister of Finance, Planning & Economic Development on the intended settlement, response from the same minister approving settlement, Attorney General’s opinion on the settlement, notification of the President on the intended settlement and legal opinion justifying settlement at appeal, response of the President on the intended settlement, Cabinet approval of the settlement and Notification of Parliament on the settlement.
Tullow is yet to respond.