Tax Wars: URA’s Relentless Pursuit of Heritage Oil

Tax Wars: URA’s Relentless Pursuit of Heritage Oil

Posted on 12 January 2025 0
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By Spy Uganda

Any lawyer will advise their client that instead of paying billions of money to the winner, it’s better to keep running from one court to another, spending just a fraction on court fees and legal teams to exhaust the other party. The hope is that they will eventually give up or that something unexpected, perhaps by divine intervention, will occur. They often resort to trivial excuses, asking courts for “interpretations” to prolong the case. In legal jargon, there’s a term called “busybody,” which describes someone who appears to be working tirelessly but is, in reality, doing absolutely nothing. Interestingly, these individuals know they aren’t achieving anything, but their aim is to create the impression of being actively engaged.

A perfect illustration of this tactic is the ongoing legal maneuvering by Bank of Uganda and dfcu Bank against the Ruparelia Group, despite the latter’s multiple court victories. Instead of accepting defeat, they’ve chosen to endlessly bounce between courts in Uganda and the UK, hoping to wear down Dr. Sudhir Ruparelia until he abandons the fight.

Another similar case is that of the Uganda Revenue Authority (URA) in its prolonged dispute with Heritage Oil. The same strategy is at play, but this time, it’s particularly troubling because it involves a government entity.

The URA has launched an appeal against a recent High Court ruling that sided with Heritage Oil in a protracted tax dispute. John Musinguzi, the URA Commissioner General, voiced dissatisfaction with the court’s decision and confirmed that the authority, in collaboration with the Attorney General, is moving forward with an appeal.

“We are dissatisfied with the High Court’s ruling and have already commenced the appeal process in coordination with the Attorney General,” Musinguzi announced to the media.

He pointed out that URA has previously secured victories in this case under various legal jurisdictions, including an arbitration ruling in London, where Uganda was awarded $4 million.

“This case has been resolved in our favor several times. The Tax Appeals Tribunal dismissed Heritage’s claim to avoid paying Capital Gains Tax (CGT) with costs. The High Court also dismissed their appeal. Even in arbitration in London, all findings supported URA, and the government was awarded $4 million. To this day, Heritage has not paid that amount,” Musinguzi emphasized.

He criticized companies that profit in Uganda but resist fulfilling their tax obligations.

“It’s unfair for someone to invest here, generate profits, and then refuse to pay taxes,” he said.

The High Court’s December 23, 2024, ruling directed URA to refund UGX 709 billion to Heritage Oil. This amount includes UGX 164.4 billion in Capital Gains Tax and UGX 542.5 billion in interest. The ruling overturned a 2010 Tax Appeals Tribunal decision that had previously favored URA.

The court found that the Capital Gains Tax computation improperly included $150 million, which was part of the cost base and not subject to tax.

“The court declares and orders that the computation of the Capital Gains Tax excludes the $150 million, which formed part of the cost base and is not taxable,” the judgment stated.

Despite the setback, Musinguzi maintained that the case is appealable and reassured that the legal process to contest the ruling is well underway.

“We’ve initiated the appeal process and are awaiting further guidance from the Attorney General,” he concluded.

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