{UAH} Response to Kanyomozi: M7's OIL MATHS DOESN'T HOLD UP

Mr Kanyomozi,

you are right that MOST countries collect revenue from taxing upstream extraction operations and income tax on corporations and workers. But you missed a very important fact: Uganda (M7) will NOT impose income tax on people AND corporations in the oil industry AND Uganda recently decided to EXEMPT oil companies from VAT on upstream operations. So that source of income is closed off!  Therefore, Uganda will be limited to collecting NET profit from the 40% that it owns.  By way of comparison, Ghana imposes 50% in income tax  (a few corporations negotiated for a 35% rate) and it also collects tax on upstream operations. 

thanks

 

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---In ....Kanyomozi, <UAH@...> wrote :

Mr Musoke, 

you have showed an armature's understanding of economics and how countries earn money.  Your numbers ignored a very big and OBVIOUS source of oil money for all countries...income tax AND VAT (or sales tax in most countries) on upstream extraction operations.  I don't know how much Uganda will tax income tax on individuals and corporations engaged in extraction of oil.  A simple search online would show you that some countries go as high as imposing a 90% tax on corporate income on oil companies.  The NRM didn't rush into oil export like other countries.  They wisely took theoir time and I am sure they thought of all such things.  Recently, the govt own a lot of money from Tullow!

 

---In UNAANET@yahoogroups.com, <joseph.musoke@...> wrote :

During the NRM celebrations 2 days ago, M7 stated that We must pump our oil from the ground...to implement these projects, government has undertaken a 10℅ cut on all sector budgets to fund these projects. Let's not have arguments on this[...]When oil comes out, this begging will stop. We shall have our own totally independent financial base. Even when oil price is down, at $50 per barrel, we shall have an additional $2.5b new money and when it improves, we shall have at least $4b".

But his numbers don't seem to hold up under scrutiny:

Uganda is expected to produce about 140k barrels per day x $50=$7m per day. 7m x 5=$35 per week. 35 x 51 weeks=$1.785bn GROSS profit. Uganda owns 40% of the 1.785=$714m. But Uganda has to contribute 40% of the operating costs. So Uganda NET profit must be less than 500m...which takes us to coffee territory (Uganda got $403m from coffee in 2015)!  

So WHERE does M7 get his numbers of $2.5bn?                      

And some people say that for new oil wells, profits start at around $90 per barrel. So it might be interesting to watch how m7 would turn a profit at $50 per barrel...assuming that buyers don't insist that he delivers the oil to a port...which means m7 would have to pay transit via the pipeline.

Then there is always "clear and present danger" that the "wealth creators" will definitely steal some of the oil money.  

thanks