Members of parliament have rejected a proposal to grant Bujagali Hydro Power Project Company a seven year tax waiver but instead approved an amendment in the Income Tax (Amendment), Bill 2025 exempting the company from income tax for a year.

The Income Tax (Amendment), Bill 2025 was presented by the Minister of State for Finance, Planning and Economic Development (General Duties), Hon. Henry Musasizi, and passed during plenary sitting on Wednesday, 14 May 2025.

The Committee on Finance, which considered the Bill, recommended a tax waiver for the power generating company up to 2032, basing it on the period of the purchase agreement.

“Government committed to the tax exemption, the committee recommends that the exemption for seven years as proposed in the Bill to be consistent with power purchase agreement,” said Hon. Amos Kankunda, the Committee Chairperson.

He added that exempting the company from income tax would also avert the anticipated increase in power tariffs.

In his minority report, Hon. Ibrahim Ssemujju (FDC, Kira Municipality) urged the legislators to reject the proposal, saying that the power generating company made a profit of Shs380 billion in 2021, as a result of tax exemption and yet power tariffs remained high.

“There was an ad-hoc committee of Parliament that discovered that by 2021, Bujagali had benefited from a Shs388 billion tax exemption. While Bujagali continued making abnormal profits, the tariffs continued increasing,” he said.

Hon. Nathan Nandala Mafabi (FDC, Budadari County West) advised the Attorney General, Kiryowa Kiwanuka, to review the purchase agreement, as opposed to extending the tax exemption.

“We should not allow any exemption, we must be careful with what we are doing and instead ask them [Bujagali] to remit excess income collected to the consolidated fund,” he added.

Hon. Karim Masaba (Ind., Industrial Division, Mbale City), proposed a one year exemption, ending on 30 June 2026, to allow the Attorney General to re-negotiate the purchase agreement with the company, as recommended by the ad-hoc committee.

“The Minister of Finance requested for time to allow the Auditor General to conclude on the special audit report. Why then rush to exempt, instead he should have updated the country on the report of the ad-hoc committee and that of the Auditor General,” he said.

Attorney General, Kiryowa Kiwanuka, said that government will re-negotiate but warned that if the tax waiver is not granted, power tariffs will increase.

“It was not a good agreement, but that is what we have before us. We need to appreciate the consequences of our action,” he said.

On the other hand, startup businesses with a registered investment capital not exceeding Shs500 million and established by a Ugandan citizen for a period of three years will be exempted from income tax.

Committee Chairperson, Kankunda said that the proposal will promote formalisation of Small, Medium Enterprises by encouraging business registration as a requirement for qualification for the exemption.