Regional business lobbies push for harmonisation of taxes across EA
Dar es Salaam. Business Associations in East Africa are pushing for harmonisation of taxes and levies which, they say, are adversely affecting the potentials for intra-trade within the economic bloc.
The regional private sector lobby groups from the six-member states of the East African Community convened a two-day consultative meeting starting yesterday to come up with proposals on Customs duties and domestic taxes.
The associations - all of which are under the regional private sector umbrella body, the East African Business Council (EABC) - say the business community is facing various “discriminatory” taxes which are levied by the respective member countries on goods originating from fellow member countries within the region.
“This discrimination is very prominent in excise duties and value-added tax (VAT),” said an EABC board member, Mr Hussein Sufian, when he was opening the meeting.
While Kenya charges 16 per cent VAT, Tanzania and the other EAC members countries charge 18 per cent.
The regional meeting is expected to come up with proposals on harmonised taxes which would then form part of the EABC policy agenda for 2020/2021.
“We need harmonisation of the regulatory fees and domestic levies si as to promote trade within the bloc,” stressed Mr Sufiani - who is the director of Corporate Affairs at the Bakhresa Group of Tanzania.
An EABC baseline survey on Customs duty and domestic taxes which was conducted in September this year established that 17.5 per cent of the tariff lines are not in line with the regional common external tariff (CET).
Differing tax rates in the region are said to result in loss of intra-EAC trade and loss of public revenues, as well as limitation of investments in the industrial sector.
In 2010, the EAC countries drafted an agreement to eliminate double taxation and prevent tax evasion. But it has not been put into effect as Tanzania and Burundi have not yet ratified the agreement.
“This is frustrating the private sector no end. You sometimes find that these countries have more or less similar agreements with countries outside the EAC bloc,” said the EABC Trade Economist, Mr Adrian Njau.
A report by the United Nations Economic Commission for Africa (Uneca) shows that intra-EAC trade dropped to $2.4 billion in 2017, down from $3.5 billion in 2013 - with Kenya and Tanzania being blamed for the decline. Non-tariff barriers (NTBs) and increasing imports from Asia were cited as the main reasons for the decline.
The intra-EAC trade decline reflects a gradual loss of competitiveness among the region’s manufacturers, compared with Asian exporters - as well as increasing protectionism fuelled by political tensions that have engulfed the region over the past couple of years.
