War of ideas as top legal brains weigh coffee deal

Attorney General Kiryowa Kiwanuka has defended the controversial deal the government reached with the Uganda Vinci Coffee Company (UVCC), saying the terms of the deal, including tax breaks and other concessions, have been studied and judged in accordance with the law. .

“Before approving this agreement in accordance with my constitutional mandate under Section 119, we have studied its provisions and found that the agreement is in accordance with Ugandan laws,” Mr. Kiwanuka wrote in a statement sent to the commission. parliamentarian for commerce, tourism and industry on Friday.
The committee, which closed investigations into the controversial deal, is expected to come back with a position early next week.
The Attorney General’s statement was in response to questions raised earlier in the parliamentary committee when Mr Kiwanuka and Finance Minister Matia Kasaija made an appearance.

Good prices?
Mr. Kiwanuka’s statement was also intended to assure coffee growers that the UVCC will pay a premium for quality beans.
“…The agreement stipulates that the company agrees to pay for the priority supply of premium coffee beans at a higher price to be determined by the company, but in no case lower than the price approved by the authority authority for a particular product shipment or the prevailing international price for each respective grade of coffee, whichever is lower,” the statement read in part.

The statement by the Chief Government Solicitor comes days after the Uganda Law Society (ULS) told the same parliamentary committee that the deal was grossly unfair to Ugandan farmers as it gives UVCC the ” latitude to determine the price of its products”.
ULS president Phoena Wall Nabasa said the deal was shrouded in “a lot of discretion.”
She added that the deal should have been done with the highest degree of “openness as opposed to the secrecy in which it appears to have been conducted”.

Ms Nabasa, who questioned why the farmers were never involved in the negotiations that led to the signing of the agreement, also argued that there was no evidence that the agreement had been submitted to the Parliament or the Solicitor General, especially since it creates tax obligations for Ugandans.
“…The Ugandan Law Society therefore concludes that the agreement is unlawful and must be terminated and the relationship with the society regularized through proper due diligence, due process and proper verification of stakeholders before any further activity can take place. continue,” Ms. Nabasa said, adding that there was no indication that the Uganda Coffee Development Authority or the Ministry of Agriculture were consulted.

incentives
The Attorney General (AG) and the ULS differed sharply with respect to the incentives and other freebies offered to the UVCC.
The AG argued that Article 12 of the Investment Code Law, which sets out the eligibility conditions for the incentives, states that an investor who engages in a priority area specified in the law is eligible for the incentives. The law cites agribusiness as one of the priority investment areas.

“As the company intends to invest in agro-processing, it qualifies for government inducement within the meaning of the Investment Code Act 2019,” Mr Kiwanuka wrote.
He argued that Vince Coffee’s commitment to invest in agro-processing stems from its commitment to set up a coffee processing facility with a processing capacity of 60,000 tonnes of Ugandan green coffee per year in the Kampala Industrial and Commercial Park, Namanve.

The AG also justified the tax incentives given to UVCC on the grounds that it was entitled to them under Section 21(1)(a) of the Income Tax Act. The article provides that the income of a person engaged in the processing of agricultural products is exempt from tax for 10 years from the date of establishment of the business.
He said the UVCC was also entitled to exemptions for paying stamp duty, excise duty and VAT on the grounds that it was a strategic investment involved in agricultural transformation.

Mr. Kiwanuka further defended the government’s decision to pledge to pay taxes on behalf of the company to bear the cost of all such taxes such as Pay as You Earn, local utility tax and withholding tax. The source. He held that this was permitted under the Tax Procedures Code Act.

Difference of opinion
The ULS, however, criticizes the government for what it describes as an agreement that “provides general tax exemptions” and which requires the government to pay taxes on behalf of UVCC and interest on loans that the company owes. incur since it intends to take out a mortgage on land for which he has not paid a premium.
“The intent of tax relief or incentives for investors is based on the fact that they are investing large sums of money in the economy and will need a period of relief to recoup the costs of investment and break even,” Ms Wall wrote, adding: “Granting such relief to a company that intends to mortgage even the assets the government has would be presumptuous, irregular, risky and questionable.

Ms. Wall’s statement also opposed commitments made by the government to bear the costs of any taxes the UVCC may be exposed to; indemnify the company in the event of major events and; closing coffee pricing and exporting for the business.

Non-fiscal incentives
Mr. Kiwanuka had in his statement defended the decision to supply electricity to the UVCC at a subsidized price of 5 US cents per unit. He said this is in line with government policy to promote manufacturing as part of import substitution and export promotion strategies. Ms Wall, however, argues that such a move would be illegal in international trade.

“Illegal subsidies and/or overly broad subsidies that provide a huge benefit to a domestic industry are prohibited in international trade. [Subsidised electricity supply] is too broad a subsidy and could be interpreted as illegal and as a distortion of international trade which will lead to our coffee exports being subject to trade remedies and/or even being prevented from entering certain markets,” he said. she pointed out.

Accusations that the contentious deal had in fact given the UVCC a monopoly have been plentiful. The ULS boss reiterated the claim on the grounds that the government’s commitment to providing what he described as “priority supply” to the UVCC amounted to the creation of a monopoly.
“We are also of the view that the government is creating an oligopoly over a product that it does not have in a free market economy like Uganda,” she argued.

However, Mr Kiryowa Kiwanuka insists that the government has only undertaken to take reasonable measures to ensure that the UVCC has an adequate supply of coffee. This, he said, involves activities such as providing extension services to coffee growers to boost production and quality controls.

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