Gov't Asked To Go Slow On Double Taxation Agreements

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In short
Ruth Namirembe says there is no need for Uganda to hurry implementing the agreements because Uganda is currently able to tax incomes from businesses like Mukwano and others that have cross boarder operations.

Government has being advised to renegotiate its Double Taxation Agreements (DTAS) with some developed countries. There is fear that Uganda is losing huge amounts of money through tax avoidance using tax treaties, conventions generally known as double tax agreements (DTAs).


Uganda has double taxation agreements (DTAs) with Denmark, India, Italy, Mauritius, Netherlands, Norway, South Africa and United Kingdom. Francis Kamulegeya, a Senior Partner with PriceWaterHouse Coopers (pwc), says double taxation agreements ensure that one isn't taxed twice on the same income in case they operate in two countries. 


Ruth Namirembe, a Lawyer and Tax Consultant with PKF Audit firm in Kampala, says countries like Uganda have become "Tax havens" for companies without any real business here, which only use it to benefit from the Double Tax Agreements.

 
She says this affects the amount of tax that can be collected to fund Uganda's development needs. Namirembe was one of the trainers at a Journalists' training on tax and taxation policies organized by ActionAid and Southern and Eastern African Trade, Information, and Negotiations Institute (SEATINI). 


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A 2016 report by Oxfam and Novib, said developing countries were losing over €460 million annually due to tax evasion via the Netherlands alone and that more than US$ 100 billion annually is lost through tax evasion worldwide. SEATINI-Uganda said in 2014 that multinational companies had found a way of avoiding tax by establishing subsidiaries in other countries to act as conduits for tax avoidance in the countries where they operate. 


That multinationals have those arrangements to facilitate profit shifting where profit ends up in developed countries, with minimal tax payed in the countries of operation. ActionAid and Southern and Eastern African Trade, Information, and Negotiations Institute (SEATINI) have been campaigning against the impact of tax havens, saying countries like Uganda should tighten the noose on multinationals seeking to use existing taxation treaties to avoid paying tax. 


Namirembe said there is need for transparency and clear rules of operation to ensure that multinationals don't deprive Uganda the little it could have earned from taxation. In his last Financial Year budget speech, Finance Minister, Matia Kasaijja said government was considering renegotiating the Double Taxation Agreements.



But there is concern that Uganda is among the East African Community member states pushing to implement an agreement on double taxation avoidance (DTA). Uganda, Kenya, and Uganda already ratified the agreement that has been in place since 2010. Sources say there are arrangements to sign another agreement with Qatar.

 
Qatar has reportedly promised 4000 jobs to Ugandans as part of the deal that would see Qatar companies establish here to escape some of the taxes. The East African Business Council (EABC), comprised of private businesses in the region has been pushing Uganda and other EAC members to implement Double Taxation Agreements, saying they would encourage cross-border trade under the Common Market Protocol.


But Ruth Namirembe says there is no need for Uganda to hurry implementing the agreements because Uganda is currently able to tax incomes from businesses like Mukwano and others that have cross boarder operations. Others have argued that Uganda would have more flow of Foreign Direct Investments once it entered more Double Tax Agreements. Namirembe however says there is need for a balance to ensure that Ugandans don't lose out in revenue.


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ActionAid and Southern and Eastern African Trade, Information, and Negotiations Institute (SEATINI) have used the Uganda/ Mauritius Double Taxation Agreement to prove their case. 
They say Uganda narrowly survived losing the $404 million tax dispute between Heritage oil and Tullow Pty.

 
They say Uganda was lucky to have had a withholding tax arrangement with Tullow otherwise it would have lost the money. Heritage tried to avoid paying Capital Gains Tax after selling assets to Tullow. Investigative reports have indicated that in 2010, Heritage Oil and Gas Ltd tried to pay taxes from its deal with Tullow by moving the country where the company was registered from the Bahamas to Mauritius. 




Mauritius had a double-tax agreement with Uganda, which in principle means companies pay tax in only one of the two countries. Uganda won the appeal at Tax Appeals Tribunal but Heritage still disputed the decision and moved to a court in London.

Tullow paid the Ugandan government and later successfully sued Heritage to reclaim the money. The disputed ended with the controversial Shillings 6 billion presidential handshake.