East Africa should harmonize tax, says business council

Dar es Salaam. The East African Business Council (EABC) has in this month commissioned a study on the harmonisation of excise duty in the region with a view to bolstering trade among member states, The Citizen has learnt.

The differing tax systems hamper the enjoyment of free movement of goods, services, capital and workers and thus adversely affects the East African Community (EAC)-intra trade.

For the years now, the region’s intra trade has been not promising, remaining static at 15 percent of the total trade with the rest of the world, according to official data.

The revelation on the commissioned study on the measure meant to scale up trade, was made here yesterday during the East EAC private sector consultative meeting on the 2022/23 post budget and sensitisation on the Common External Tariff (Cet).

Disclosing the new development, trade and policy advisor with the EABC, Adrian Njau said the consultant will look at excise duty across the region, seek the member states’ views and come up with recommendations on how to go about it.

“We have decided to start with the excise duty because it is the one which is more challenging (compared to other forms of taxes),” said Mr Njau.

He disclosed that after the harmonisation of excise duty, Value Added Tax (Vat) will be the next target as per the EAC roadmap. Thereafter, he added, income tax and tax incentives will follow respectively.

“Given that in 2018, the EAC partner states adopted the EAC policy for the harmonisation of domestic taxes, it is high time we expediently commenced the harmonisation of taxes,” recommended Mr Njau in his presentation.

He recommended for the partner states to enhance human and financial resources of the fiscal and monetary department at the EAC secretariat to enable steering the tax harmonisation process.

In the course of the domestic taxes harmonisation process, he suggested, the EAC partner states needed to actively involve the private sector.

“The private sector should start harmonising their positions with regard to the harmonisation of domestic taxes,” urged Mr Njau.

This, he suggested, should go in tandem with the elimination of all discriminatory domestic taxes in the region as they are against treaty and protocols.

Confederation of Tanzania Industries (CTI) vice chairman Hussein Sufian said unlike at the national level whereby the private sector submits tax proposals, at the regional level in recent years, the private sector has not been submitting harmonised tax proposals.

This, he expounded, has contributed to the existence of the disparity of tax measures and slowed down the harmonisation of domestic taxes as well as distorts the EAC Cet which is supposed to be uniformly applied by the EAC partner States.

“Failure to submit the private sector harmonised tax proposals has been triggered by a lack of platform whereby the EAC private sector could meet and harmonise their tax proposals,” said Mr Sufian.

If they had such a platform, they would have been in a position to jointly submit their proposals to the EAC secretariat for consideration during the EAC pre-budget consultations of ministers of Finance and Economic Affairs.

South Sudan National Chamber of Commerce, Industry and Agriculture secretary for finance and administration Yacoub Leju said having different taxes within the region was affecting the welfare of the citizens because it has a direct impact on consumer goods.

He put the blame on the governments for causing the difficulties in the harmonisation of taxes in fear of losing sovereignty on tax matters.

“As a matter of fact, if we are to make it, the engagement on the harmonisation of taxes should involve both parties---the government and private sector,” suggested Mr Leju.

The investment specialist-business environment with the Private Sector Foundation Uganda, Mr Eric Sempambo, called for the member States to expedite the harmonisation process on the grounds that it was the citizens who were suffering.

“Different Vat regimes, for-instance, which in some countries are very high, limit consumption,” said Mr Sempambo.

“We need to work on our competitiveness because to a large extent it is the one to blame for discriminatory taxes within the region.”