Uganda hits Tullow Oil with $407m tax bill

UPDATE: We have received the following comment from Professor Sol Picciotto, senior adviser to TJN: The Tullow case is interesting because the Tax Tribunal held that a clause in a production sharing agreement signed by a government Minister which gave exemption from taxes could not override the tax legislation, because the Uganda Constitution provides that taxes and tax exemptions must be approved by parliament. A victory for democracy —  at least so far.

Tullow has said it will `robustly challenge’ the ruling. This could be a great issue to campaign on: can  private deal between a company and a Minister override law in a democracy?

Tullow Oil has been hit with a massive $407m tax bill from the Ugandan government over the $2.9bn sale of some of their oil fields to Total.

The figure is reported in The Nation and you can read the full story here.

One of the interesting things about Tullow’s reaction is that they are not claiming that the bill is incorrect, but that a deal reached with the government meant they didn’t need to pay it.

Tullow chief executive Aidan Heavey said in a statement: “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,” he added.

So the Ugandan government cut a deal, like so many other governments have done over the last few years. In Europe these practices are coming under increasing scrutiny after the European Commission has launched investigations into the sweetheart deals reached with companies like Amazon and Apple.

It seems African governments are now coming to similar conclusions about corporate welfare payments to large multinationals.