Harmonise EAC tax regime, states told

Kampala. Tax harmonisation across the East African Community (EAC) member states is the way to go if the countries  are to attain economic union,  businesses opine.

Currently, the countries’ huge disparities in tax administration and systems have had a negative effect on achieving principles of freedoms enshrined in EAC customs union and common market. 

In trying to rectify these disparities, experts from the member states have resumed discussions on how harmonisation of domestic taxes will be handled.

The East African Business Council (EABC) executive director, Ms Lillian Awinja, told a technical working group meeting in Arusha on Tuesday: “Tax harmonisation is an element that runs through all stages of EAC integration, including the EAC customs union, common market, monetary union and political federation.”

However, Ms Awinja said partner states have retained the mandate to freely decide on the domestic taxes.

Kenya, the region’s biggest economy, charges the lowest VAT rate at 16 per cent while Tanzania, Uganda and Rwanda charge 18 per cent. 

Ms Awinja said the EAC vision is stated as “to be a prosperous, competitive, secure, stable and politically united East Africa”.

The mission is “to widen and deepen economic, political, social and cultural integration in order to improve the quality of life of the people of East Africa through increased competitiveness, value addition production, trade and investment.

“However, outdated and incoherent national tax systems seriously reduce the possibility of realising this vision and mission,” she noted.

Mr Muhammed Ssempijja, a tax partner at Ernst & Young, in his view about the regional private sector reviving debate to harmonise domestic taxes by member countries, said: “Domestic tax harmonisation is desirable and a good thing because it will bring the real feel of a single market.”He, however, said if domestic taxes are harmonised, some member states may be more attractive than others but this will be shortlived.

The Uganda Revenue Authority commissioner general, Ms Doris Akol, in an earlier interview with this newspaper, said each of the member States was still responsible on the way they administer domestic taxes. 

“We are in full discussions on how to harmonise at the EAC and hopefully this will be in place when we have the monetary union in place,” Ms Akol said. 

EAC is a regional intergovernmental organisation of six partner states:  Burundi, Kenya, Rwanda, South Sudan, Tanzania and Uganda.

 with its headquarters in Arusha.