Africa-focused explorer Tullow Oil has pledged to fight a £238million tax bill after losing a tribunal in Uganda.
The state ordered that the firm had to pay a capital gains tax (CGT) on the £1.7billion sale of stakes in three oil blocks in the country to Total and China National Offshore Oil Company (Cnooc) in 2012.
The company claims it had been granted a tax exemption by a previous Ugandan minister of energy on one of the blocks. But yesterday the FTSE-100 firm said it was “extremely disappointed” that the tax appeals tribunal claimed the minister at the time wasn’t authorised to grant the exemption.
The Ugandan Revenue Authority had initially slapped Tullow with a CGT demand for £276million.
Tullow paid about 30% of the bill – £83million – in order to launch an appeal.
The tribunal said it had lowered its assessment of the amount Tullow owes in tax to £238million from the original £276million charge, reflecting reliefs on some of the costs Tullow incurred in exploration.
The firm claims that the amount it has paid already “exceeds its liabilities in relation to CGT” on the other two blocks that were part of the sale.
Last year Uganda dropped ten places – to 140 out of 177 countries – on a key index measuring perception of government corruption. Transparency International said the Ugandan regime had been hit by a collapse in donor support after a catalogue of corruption scandals.
Aidan Heavey, chief executive, said: “Tullow is very concerned by this ruling which ignores a contractual term signed by a Government Minister in Uganda.
“Tullow is Uganda’s largest foreign investor and a major taxpayer.
“Over the last 10 years, Tullow has spent £1.6billion in Uganda and discovered 1.7 billion barrels of oil.
“This money was spent by Tullow on the understanding that our contracts with the government, which contained important incentives to invest that were vital at a time when no oil had been discovered in Uganda, would be honoured.
“We will now carefully consider all our options to robustly challenge this ruling.”