Working Group on the Audit of Extractive Industries.

Assessment and collection of revenue from the extractive industry in Uganda

There are a number of payments that are made in the extractive industry. These include bonuses, fines, penalties, taxes and royalties. These vary from simple payments made as a one off at a certain point or occasion to those requiring formulas and calculations. One of the most important stages of revenue collection in the extractives industry is the assessment of payments due to the governments.  Assessment is the process of finding the value of the petroleum or mineral resources produced.  In simple terms, assessment is volume x price. Finding the appropriate price-and sometimes the right volumes can be a difficult task. This can be done using market prices where available or in some instances benchmark prices as set on markets like London Metal Exchange, Platts and others. When this cannot be done, some set the prices based on the average of the arms-length price used by the trading companies.

In a number of countries, tax administration is a responsibility of a tax department or authority. However, in others, while the tax is responsibility of the tax department, royalties and production payments are a responsibility of the ministry in charge of natural resources or the National Resource Company[1]. The sector ministry is involved because in many occurrences, the technical expertise with regards to valuation of minerals or petroleum is in the sector ministry rather that at the tax authority. Correct assessment ensures the Government collects the amount due as in the agreements or regulation. Jack Calter states in his paper Resource tax administration: The implications of alternative policy choices that;

In most developed countries, there is little connection between resource management and resource tax administration, but in developing countries there is often a close connection. What is certain is that building resource management objectives into resource tax legislation makes tax administration much more complex and demanding. It is hard enough to find people able to interpret tax laws and audit tax returns effectively, let alone able to tell oil companies how to run an oilfield. Tax administration can be made simpler and more transparent if tax design contains adequate cost containment incentives, and fiscal and resource management regulatory functions are then kept separate.

While in some countries the collecting agency undertakes the assessment, in others, these duties are segregated. Finding the merits and demerits of one system over the other will not be discussed rather introducing the world to how Uganda does it.

Assessment and collection of revenue from extractives in Uganda

Uganda is endowed with a number of resources that have the potential to thrust the country into economic transformation. These include mineral resources and petroleum.

Table 1 extractive potential of Uganda

Uganda’s extractive potential

Minerals Reserves location
gold 6.5 million ounces Buweju,Rukungiri,Kanungu
Tungsten 1.8 million tonnes Kabale
copper 6.0 million tonnes Kilembe
cobalt 5.5 million tonnes Kilembe
Iron ore 186 million tonnes Kabale, Bukusu,Mbarara
niobium 130 million tonnes Sukulu
Tin 3.5 million tonnes Ntungamo,Isingiro
Limestone 320 million tonnes Karamoja,Hima, dura
Phosphates 280 million tonnes Sukulu
Vermiculite 54 million tonnes Namekhara
Gypsum 2 million tonnes Kibuku
Bentonite 5 million tonnes Kaiso Tonya
Columbite-tantalite 3.5 million tonnes Ntungamo
Rare earth Elements 0.89 million tonnes Sukulu
Petroleum 6.5 billion barrels STOIIP Albertine Graben


Assessment and Collection of revenue from petroleum in Uganda

Uganda has an estimated 6.5 billion barrels of stock tank oil initially in place currently and with the current technology expects to produce about 1.4 billion barrels. Uganda expects to generate its revenue from a number of sources. According to Oil and Gas Revenue Management Policy 2012, the expected sources of revenue due to government from petroleum are expected to be royalties, Government’s share of profit oil and taxes from the petroleum revenue due to the companies. Costs recovery is capped at a given percentage of production. This implies that at no single point would the companies recover the entire amount due in one year.


Figure 1: Share of petroleum revenue in Uganda. Source; Oil and gas revenue Management Policy Uganda.

The Public Finance and Management Act 2015, section 57. (1) states that;

The petroleum revenue due  to  the  Government  shall  be collected or received by the Uganda Revenue Authority.

Section 57 (2) goes on to state that;

The petroleum revenue assessed as due each month, shall be paid by the seventh day of the following month by the person obliged to make the payment.

According to the above law, the collection of petroleum revenue shall be done by the Uganda Revenue Authority which is the tax collection agency. While the Public Finance and Management Act 2015 does not indicate who will undertake the assessment, the Petroleum Exploration Development and Production Act 2013 states that “The Minister may, by regulations, stipulate the equipment, methods and standards to be applied for measurement of petroleum produced, processed or transported for resource management, operational, economic and fiscal purposes.” This is further amplified by the petroleum upstream regulations which state that “The market price for crude produced shall be determined at the end of each month in a currency determined by the Minister in accordance with section 123 of the Act.’’-the Minister in these two particular cases is the Minister of Energy and Mineral Development. This indicates that the assessment of revenues shall be done by the Ministry of Energy and Mineral Development. The petroleum upstream regulations 2016 go further to state that the Auditor General shall undertake an audit of the petroleum activities and this audit shall constitute the cost recovery element.

This indicates that in Uganda, the sector ministry undertakes the assessment, the Office of the Auditor General undertakes the recoverable expenditure audits and the Uganda Revenue Authority collects the revenue due to government. This indicates a segregation of duties.

Assessment and collection of revenue in the mining sector

The assessment and collection in the mining sector is different from that in the petroleum sector. This is because unlike petroleum which is either a liquid or a gas, minerals are different in nature. The mining sector in Uganda is made up of two types of individuals, those with many small, non sophisticated, projects- the artisanals and those with large sophisticated projects. In Uganda, The mining companies submit monthly returns to the ministry. These returns show the minerals produced by the mining company-if any. Mineral royalties are collected based on production. The Mining Act 2003 states that;

 All minerals obtained or mined in the course of prospecting, exploration, mining or mineral beneficiation operations shall be subject to the payment of royalties on the gross value of the minerals based on the prevailing market price of the minerals at such rates as shall be prescribed.

According to the Mining Act 2003, statutory instrument number 96 of 2nd December 2011 the royalty from the mining industry is as follows;

Class of mineral Type of mineral Expected royalty
Precious metal 5%
Precious stone 10%
Base metals and ores 5%
Coal peat 5,000 per tonne
vermiculite 10,000 per tonne
Kaolin, Limestone, chalk, gypsum 10,000 shs per tonne
Marble granite and other dimension stone 5,000 shs per tonne
Pozzolanic material 1,000 shs per tonne
phosphates 10,000 shs per tonne
salt 500 shs per tonne


It is stated in section 100 and 102 that the Commissioner shall undertake the assessment of the royalties. However it is stated under section 99 of the Mining Act 2003 that the Minister of Energy and Mineral development with approval of parliament can waive part or all of the royalty due from miners.

The current practice in the mining sector in Uganda is assessment is done by the Directorate of Geological Surveys and Mines and the collection is done by Uganda Revenue Authority-the tax collecting agency. The assessment involves finding out the quantity and grade of the mineral produces and a royalty is applied basing on the prevailing market rates as stipulated in the law. A formular is provided as shown below.

Gross value = amount of mineral X grade X dollar rate  X value of mineral on the market
royalty = royalty rate as shown in table 2  X gross value


Gross value– total value of mineral mined

Amount of mineral-amount of mineral assessed

Grade– the percentage of purity in the ore/mineral if refined

Dollar rate– exchange rate between the Uganda shilling and a dollar for that day

Value of mineral-value of mineral on the international market

Royalty– amount of royalty to be assessed

Rate – rate as set out in the law

The Directorate additionally issues out import and export permits after collecting the royalties due. The practice of having the Directorate of Geological Mines and Survey undertaking the assessment ensures that the assessment is undertaken by highly technical personnel with the necessary specific tools.

The segregation of duties undertaken in Uganda is as important part of revenue collection. Under the PSA system, the Government collects revenue from taxation and other payments related to oil production under the sliding scale method. As a result, it is prudent to have assessment undertaken by the regulator.

One of the advantages of segregation of duties is that it reduces the risk of collusion. However it is critical for the different agencies to work together in order to make use of the different skill sets.


There is segregation of duties in Uganda between assessment and collection. However, during these engagements it is important for the assessment agency and the collection agency to have a close working relationship in order to ensure that the tax laws, the laws related to extractives and the agreements are in congruence.


[1] The Taxation of Petroleum and Mineral Resources, Principles, Problems and Practice 2010

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