Published on 08/05/2025
Minister of State for Finance, Planning and Economic Development (General Duties) Henry Musasizi, has defended the government’s proposal to extend Bujagali Energy Limited’s income tax exemption until 2032, arguing that the move is necessary to prevent a spike in electricity tariffs.
Appearing before Parliament’s Finance Committee on April 30, 2025, Musasizi said the current exemption, set to expire in June 2025, should be extended up to the end of Bujagali’s contract in 2032. He noted that the extension would eliminate the need for repeated annual requests for the same waiver.
“If we don’t exempt Bujagali, the power tariff will increase,” Musasizi warned. “In 2017, we gave a five-year exemption, which expired. Since then, we’ve been seeking one- to two-year extensions. Last year, Parliament declined our request, but after consulting the President, he insisted the waiver be granted. This time, we want to conclude the matter once and for all since the contract ends in 2032.”
The Ministry of Finance maintains that the exemption will enable Bujagali to recover its investment and eventually generate taxable profit. Additionally, it aims to keep electricity affordable for consumers and businesses by reducing operational costs.
According to the government, failure to extend the tax waiver would lead to a 15.5% increase in Bujagali’s generation tariff—from US cents 8.31 to 9.60 per unit. This would push the end-user tariff from UGX 459.8 to UGX 881.7 per unit.
Earlier, Parliament had rejected the waiver but reversed its decision and approved an extension up to June 2025, following the minister’s warning of a potential tariff hike.
Musasizi’s request comes as the Ministry of Finance revealed that Uganda forewent UGX 3.609 trillion in tax revenue in 2024 through various exemptions and waivers. Beneficiaries included Members of Parliament, security officers, judicial staff, and private companies.
The Tax Expenditures Report 2023/24 shows revenue lost through Corporate Income Tax exemptions rose from UGX 253.94 billion in FY 2019/20 to UGX 326 billion in FY 2023/24—a 28% increase. Among the key beneficiaries was Bujagali Energy Limited, which had previously been granted a five-year exemption up to 2022. A further amendment to Section 21(1) (ab) of the Income Tax Act proposed extending this to 2027, citing the need to support energy production and clean energy transition.
Data shows Bujagali’s tax exemptions cost the country UGX 100.04 billion in 2019/20, UGX 90.73 billion in 2020/21, UGX 89.52 billion in 2021/22, UGX 94.05 billion in 2022/23, and UGX 99.06 billion in 2023/24.
Civil Society Protests Waiver Extension
Civil society groups under the Tax Justice Alliance–Uganda strongly opposed the extension, arguing that Bujagali has already recovered its investment. During a press conference in Kampala in April 2025, the alliance cited a 2022 report by Parliament’s Ad Hoc Committee, which revealed that by then, Bujagali had recouped its US$176.9 million investment and had received US$671.5 million from the government—far exceeding the expected US$329.3 million.
The report also indicated that since 2013, Bujagali had distributed US$475.7 million in dividends to shareholders.
“If the waiver is granted, Uganda is projected to lose UGX 115.47 billion or US$31.55 million annually,” said Aloysious Kittengo, Tax Policy Analyst at SEATINI–Uganda, which hosts the Tax Justice Alliance secretariat. “This benefits the company in excess of profits while offering little or no relief to ordinary taxpayers.”
Kittengo urged Parliament to reject the waiver and instead explore alternative mechanisms like targeted tariff subsidies. He also called on the government to renegotiate the Public-Private Partnership (PPP) contract with Bujagali as recommended by Parliament and recover excess payments already made.
He added, “The government must use accurate figures when calculating capacity payments and enhance transparency by improving access to information on contracts and agreements.”
Government Commitment to Reforms Questioned
During the committee meeting, several MPs expressed concern over the government’s failure to implement recommendations made by Parliament’s Ad Hoc Committee.
Mbale Industrial Division MP, Karim Masaba, questioned whether the contract had been renegotiated as recommended.
“I was part of the Ad Hoc Committee, and we agreed that the contract—negotiated when the government was desperate—needed revision,” Masaba said. “We granted a one-year extension to allow for that, but now you’re asking for an extension up to 2032 without updating us on the renegotiation.”
Kabula County MP, Enos Asiimwe, also asked whether the government had addressed Parliament’s earlier findings.
“You’re seeking a seven-year extension. Have the previous concerns been resolved?” he asked.
In response, Musasizi maintained that the government had reviewed the recommendations and still believed the extension was the best course of action.
“There’s no new justification beyond what I’ve already presented,” he said. “My only prayer is that you understand our circumstances and approve this proposal.”
