By Joseph Kiggundu
KAMPALA — Parliament has approved a Shs8.7 billion tax waiver for Fresh Cuts Uganda Limited, despite concerns from some legislators that the meat exporter had not sufficiently demonstrated that it qualified for the relief.
The decision was made during Tuesday’s plenary sitting chaired by Speaker Jacob Marksons Oboth.
The waiver covers tax arrears amounting to Shs8.73 billion and follows a recommendation by Parliament’s Committee on Finance, Planning and Economic Development.
The committee concluded that Fresh Cuts met the conditions for tax relief provided for under Section 43(1) of the Tax Procedures Code Act, including financial hardship, the difficulty of recovering the money and the potential hardship continued enforcement could cause the company.
Committee chairperson and report presenter Max Ochai said Fresh Cuts employs about 110 workers and provides a market for thousands of farmers through its meat business.
However, the company has also accumulated significant liabilities, including salary arrears, Pay As You Earn (PAYE) obligations and National Social Security Fund contributions.
According to the committee, the company’s financial position had deteriorated significantly.
The report indicated that by 2022, Fresh Cuts had liabilities of Shs28.66 billion compared to assets worth Shs8.49 billion. A shareholder subsequently wrote off a Shs20.82 billion loan in an effort to help revive the business.
Ochai said the company’s financial problems were further compounded by tax enforcement measures taken by the Uganda Revenue Authority (URA).
Finance Minister, Hon. Henry Musasizi had earlier presented the requests for the waivers
He told Parliament that the company’s bank accounts were reportedly frozen in 2015, while computers and staff records were confiscated, disrupting its operations.
The committee further heard that Fresh Cuts later lost three containers that were auctioned at the Port of Mombasa after the company allegedly failed to access funds needed to clear them.
“The aggressive tax recovery efforts by URA negatively affected the company’s operations, plunging it further into financial distress,” Ochai said.
MPs question waiver
However, Nyendo-Mukungwe Division MP Gyaviira Ssebina opposed the waiver, arguing that it would not resolve the problems that had contributed to the company’s financial difficulties.
Ssebina said the owners acquired Fresh Cuts without conducting adequate due diligence and consequently inherited historical liabilities attached to the business.
He pointed to the company’s wider financial obligations, including about Shs2 billion in bank loans, salary arrears exceeding Shs1.5 billion and mortgage obligations to DFCU Bank amounting to Shs4.016 billion and $520,767.
According to Ssebina, the figures demonstrated broader liquidity problems that a tax waiver alone could not solve.
“The tax waiver under consideration is not the appropriate remedy to enabling Fresh Cuts Uganda Limited to satisfy its tax obligations. It does not address the underlying issues affecting the company,” he said.
Jinja South Division West MP Timothy Batuwa proposed that the government consider taking an equity stake in strategically important companies facing financial distress.
He suggested that the Uganda Development Bank could explore a debt-for-equity arrangement to help preserve companies that make an important contribution to the economy.
“Whereas this company is useful to Uganda, helping in exportation of animal products, what we need is to swap debt with equity so that UDB helps us to run this company and maintain its strategic benefit,” Batuwa said.
Kabula County MP Enos Asiimwe called on the government to urgently present a tax expenditure report to Parliament to show the overall cost of tax waivers.
He said the report would help legislators assess the financial impact of the policy and determine whether the current approach to granting tax relief should continue.
IPA also granted Shs2.5bn waiver
In a separate decision, Parliament approved a Shs2.518 billion waiver for Innovations for Poverty Action (IPA).
The waiver relates to interest and penalties that accumulated after the organisation cleared its principal tax liability under a 2017 agreement with URA.
IPA voluntarily declared a principal liability of Shs2.063 billion in March 2017 and completed payment through instalments by November 2018.
However, the Finance Committee faulted URA for taking until 2024 to recommend the waiver, six years after IPA had fulfilled its obligations under the agreement.
According to the committee, the delay contributed to the accumulation of interest and penalties, placing additional financial pressure on the organisation.
The committee further heard that IPA’s financial position had been affected by reduced donor funding and the loss of two projects funded by the United States, leaving the organisation unable to settle the outstanding interest and penalties.
The approvals add to the growing debate in Parliament over the criteria used to grant tax waivers and the need for greater transparency on the cost of tax expenditures to the public treasury.