The Association of Oil Marketers (Uganda) Limited, which represents over 40 oil marketing enterprises in Uganda, has petitioned the Minister of Finance, Planning and Economic Development to intervene in their tax dispute with the Uganda Revenue Authority (URA).
The oil corporations say they are unsettled by recent letters from the URA requesting that they remit 15% withholding tax on all foreign transport payments they have paid over the years in importing petroleum into Uganda in a petition to Matia Kasaija dated January 24, 2022.
The oil corporations, several logistical firms, and manufacturers have been at odds with the URA since 2019, but it is only this year that the URA has began to address the issue.
The oil merchants are enraged that the URA is taking a position that contradicts the Attorney General of Uganda’s advisory opinion, which warned against the implementation of such a levy.
“The Uganda Revenue Authority’s insistence on taxing foreign transportation payments is also at odds with international norms and practices used by Uganda’s regional counterparts. “Tanzania, Kenya, Zambia, and Ethiopia are among the countries that do not tax foreign transportation payments unless the beneficiary is a business in their countries,” they stated.
Uganda is now experiencing fuel shortages due to bottlenecks caused by disgruntled transporters.
“If URA is adamant that petroleum importers pay these international transporters less the 15% withholding tax, they are reluctant to provide transportation services, thus worsening the country’s fuel shortages.” If foreign transporters refuse to accept service payments less a 15% withholding tax, it is likely that Uganda’s oil marketing corporations will bear the cost of this tax, which will raise their transportation prices. They warn that “inevitably, this expense will be passed on to the final consumer at the pump in the shape of higher fuel costs.”
“Ultimately, I foresee the URA requesting that all importers of products entering Uganda account for their items,” Denis Kakembo, managing partner at Cristal Advocates, the law firm representing the Oil Marketers Association, stated.
As a result, the tax would have a greater impact on Uganda’s economy because local importers will face the tax burden, raising the cost of doing business and hurting the economy’s competitiveness and productivity.”
The higher cost of doing business in Uganda as a result of the URA’s contested tax imposition will make the country less attractive to foreign direct investment.