When the Hunters Learn to Shoot Without Missing, the Birds Learn to Fly Without Perching

Abstract

This paper examines the phenomenon of artificial profit shifting as a component of illicit financial flows. Uganda’s upstream oil sector involves a rent sharing regime with the non-resident international oil companies. The involvement of International Oil Companies (IOCs) creates taxing rights for host governments. Unfortunately, these taxation rights can be susceptible to the phenomenon of artificial profit shifting - an aggressive strategy of tax avoidance that contravenes applicable anti-abuse tax laws and therefore falls within the prescriptive envelope of illegality.  This paper discusses the unique opportunity for the application of anti-abuse tax laws, the need for judicial cooperation in doing so, and the need for negotiation of proper rent-sharing fiscal regimes, as a solution to curb artificial profit shifting whose negative impact on the tax-to-GDP ratio continues to undermine Uganda’s efforts in achieving sustainable economic development.