Why Parliament rejected seven-year tax waiver for Bujagali

KAMPALA - Parliament has rejected a proposal to grant the Bujagali Hydropower Project a seven-year income tax waiver, instead approving a shorter, one-year exemption under the Income Tax (Amendment) Bill, 2025.

The Bill, presented by general duties state minister Henry Musasizi was passed during a plenary session on May 14, 2025.

Committee backed 7-year waiver

The Parliamentary Committee on Finance had initially recommended a tax exemption until 2032, in line with the company’s power purchase agreement.

"Government committed to this exemption," committee chairperson Amos Kankunda said. "It would help avoid increases in electricity tariffs."

Pushback from MPs

However, several MPs opposed the proposal, arguing that Bujagali had already benefited from previous exemptions without delivering lower power costs.

Ibrahim Ssemujju (FDC, Kira Municipality) cited a 2021 ad hoc committee report, which found that Bujagali had made sh380 billion in profit, partly due to tax relief, while electricity tariffs remained high.

"Bujagali was already granted Shs388 billion in exemptions by 2021. Despite these gains, Ugandans continued to face high electricity costs," he argued.

Nathan Nandala Mafabi (FDC, Budadiri County West) called for a review of the power purchase agreement instead of offering further tax breaks.

“We shouldn’t be offering more exemptions. If Bujagali collected excess revenue, let them remit it to the Consolidated Fund,” he said.

Parliament settles on 1-year relief

In a compromise, Karim Masaba (Ind., Mbale city) proposed a one-year exemption ending on June 30, 2026, to give the government time to renegotiate the power agreement.

He criticised the rush to grant exemptions without waiting for a special audit report from the Auditor General.

Attorney General Kiryowa Kiwanuka acknowledged the flaws in the original agreement but warned that rejecting the waiver could lead to increased electricity tariffs.

"It’s not a good deal, but it's the one in place. We must consider the consequences of rejecting the exemption," he said.

Tax relief for startups

Meanwhile, Parliament approved a three-year income tax exemption for Ugandan-owned startups with investment capital not exceeding sh500 million.

Kankunda said the goal is to encourage business formalisation and support small and medium enterprises (SMEs). Only registered businesses will qualify.