Uganda Tax Official Advises Against Arbitration In Heritage Row

22nd Jul 2010 14:20

By Nicholas Bariyo Special to DOW JONES NEWSWIRES KAMPALA, Uganda (Dow Jones)--The head of Uganda's tax body has advised the country's president against arbitration in a tax dispute with Heritage Oil PLC (HOIL.LN), according to a person familiar with the matter, though it isn't clear how the recommendation will affect Heritage's plan to sell assets in the country. An official close to the presidency said that Allen Kagina, Uganda Revenue Authority's commissioner general, advised the president during a meeting this week that Uganda risks not collecting any taxes on the transaction, which may be worth up to $1.5 billion, should the matter be referred for arbitration. "She advised the president that government should consider other means to ensure that Heritage pays that tax without referring the dispute for arbitration," the official said. Kagina told Dow Jones Newswires separately that the government hadn't taken a position on the matter. "Government will issue a statement as soon as a position on arbitration has been reached," she said, declining to provide further details. The person close to the presidency added that the president agreed with Kagina and said that a company that is expected to reap huge profits from the disposal of its assets in Uganda shouldn't be allowed to walk away without paying taxes. A spokeswoman for the president couldn't immediately be reached for comment. The Ugandan government this month approved the sale of Heritage's stake in two oil blocks for up to $1.5 billion to Tullow Oil PLC (TLW.LN). However, the deal is still conditional upon resolution of a tax issue and could include arbitration in London. A Heritage spokesman declined to comment. Tullow declined to comment. President Yoweri Museveni is expected to meet Uganda's oil panel Friday to offer a final ruling on the matter. The agreement had been delayed by a dispute over whether Heritage should pay capital gains tax to the government on the sale of its stake in two oil licenses in the Lake Albert oil fields. Heritage had previously agreed in June to deposit 30% of the disputed tax sum with the Uganda Revenue Authority and had offered the government the option of arbitration in London. Uganda revised its income tax laws in 2008 to introduce a capital gains tax on the disposal of assets following the discovery of commercial oil reserves in three blocks in the Lake Albert basin. Heritage said early this month that it had been advised that its plans to dispose off the assets wouldn't attract a capital gains tax. -By Nicholas Bariyo, contributing to Dow Jones Newswires; 256-70-262-4615; [email protected] (END) Dow Jones Newswires July 22, 2010 09:20 ET (13:20 GMT)