The Government has repossessed the Bugolobi apparel complex that had been sub-leased to LAP Textiles, a Libyan company, over breach of contract.
The land and buildings belonged to the defunct Coffee Marketing Board. The complex was repossessed on May 7. An inspection of the premises revealed that the company had closed business.
On June 25, 2007, Cotton & LAP Textiles Industries of Libya, signed a deal with the Government to partner in the development of the textile sector and in particular, to enable the Government benefit from concessions and benefits arising out of the US Africa Growth and Opportunities Act (AGOA).
However, LAP Textiles failed to honour the conditions to export textiles to the US, Martin Kihembo, the Uganda Property Holdings chief, the company managing government property, said.
LAP is also said to have abused the tax incentive scheme.
"The complex has been under LAP on a 49 -year sublease.
"But we terminated the sub-lease because we thought they would not achieve what we wanted. When they took over, they were supposed to export textiles to the American market. Unfortunately, they have not been able to do it," Kihembo explained.
He said the war in Libya could not have hampered the company's activities because, the rebellion started in February 2011, four years after the deal was sealed.
Under the agreement, the Government was to offer LAP incentives available to the textile industry.
This included payment of Value Added Tax and import duty on raw materials imported for manufacturing textiles and VAT on the supply of manufactured textiles.
Uganda Revenue Authority said the tax incentive was to add value to the local products based on the assumption that these companies would source raw materials from Uganda.
However, it turned out that almost all the materials used were imported and taxes not paid.
"In disregard of the agreement, a total of sh209, 449,343 was refunded to LAP Textiles in respect of PAYE for expatriate staff for the period November 2007 to February 2009.
"Included were fees for work permits for the same expatriates. Both PAYE and work permit fees were not provided for in the incentives as communicated to URA," stated a recent Auditor General's report.
The Auditor General (AG) John Muwanga said the payment of PAYE for expatriates by the finance ministry was irregular.
The AG had also warned of a risk of government losing the title of the land on which the Libyans were operating since they had the land title.
But Kihembo confirmed that the titles were safe.