African News Agency : Welcome

Kampala, 08 Jan - (ANA) - UK-based Tullow Oil has referred for arbitration a Ugandan government demand for an 18 per cent value added tax (VAT) on machinery imported into the country for exploration, papers lodged at the International Centre for Settlement of Investment Disputes (ICSID) in Washington have shown. The ICSID case, which is pending, is the second dispute involving payment of tax between Tullow, which has been making inroads into the growing oil industry in Africa, and the Ugandan government. The first arbitration, which is also pending, is in London where the oil company is seeking arbitration over a Ugandan government capital gains tax of $404 million following Tullows purchase of Heritage Oil interests in Uganda for $1.5 billion. In the ICSID matter the London-listed Tullow Oil is represented by UK law firm Ashurst and Kampala Law associates in Uganda. The Ugandan government, through the Ministry of Energy and Mineral Development is taking a robust stand on the ICSID arbitration because, according to a spokesman, Tullow should not claim taxes on supplies as recoverable costs before oil production starts. The issue here, according to government sources, is the manner in which Uganda has lost millions of dollars over the last decade that could have stayed in the country. According to figures from a report in December by Washington-based Global Financial Integrity (GFI), illicit financial flows, from Uganda between 2001 and 2012 amounted to $680 million. In Tullows case, however, the company is challenging tax demands that non-governmental organisations such as GFI and Tax Justice Network say should go towards government investment in healthcare, education, and infrastructure. A Ugandan government source said that the two disputes with Tullow highlighted the need for more transparency within the oil sector not just in Uganda in particular but in Africa in general. He said this should be an important requirement of oil companies in Africa because governments in the continents oil-producing countries based their budgets on income from the oil sector. The World Bank established the international ICSID in 1965 and is considered a leading international arbitration institution devoted to investor-state dispute settlement. (ANA)