East Africa's failure to harmonise taxes impacting trade, says EABC
EABC chairperson Ngalula chats with Mr Kayemba during the EABC courtesy call at the UMA offices in Kampala. Photo / Courtesy
What you need to know:
- EABC says countries within the EAC have no agreed tax direction, which has impacted intra-regional trade
The East African Business Council (EABC) has expressed concern at which countries within the regional bloc have failed to harmonise domestic taxes and levies among themselves.
This, EABC says, has hindered growth of intra-regional trade, which currently stands at a paltry 15 percent.
Mr John Bosco Kalisa, the EABC executive director, said that no country wants to harmonise because of the different levels of economic growth.
“Countries are very reluctant, if you look at the current taxes for example in Kenya, Uganda, and Rwanda; it’s only Rwanda that has reduced domestic taxes while others are increasing,” he said.
Mr Kalisa was part of the EABC team that paid a courtesy visit to the Uganda Manufacturers Association for a fact-finding mission on why issues at the EAC are stalling.
EABC also sought to discuss how it can cooperate as a private sector player to improve engagements at the country and regional level.
The reluctance to harmonise taxes, Mr Kalisa said has created skewed competition, with some investors choosing to invest in countries such as Rwanda because of favourable and predictable tax regimes.
“Although there is an issue of harmonisation, predictability is important; every year member states are coming up with new levies and charges, we need a coordination mechanism; if it is VAT let it be VAT and no other charges,” he said.
Ms Angelina Ngalula, the EABC chairperson, said that the 15 percent intra-regional trade is worrying, noting that it’s also an indication that there is little progress regarding regional trade.
“We need to have a plan on how we will improve this to 30 percent; now we are going into the African Continental Free Trade Area (AfCFTA), how will we perform there?” she wondered, noting that there is still too much importation, yet products produced within the region such as milk and maize, among are blocked.
“Why should we import sugar from Brazil, rice from Pakistan yet Tanzania and Uganda have good rice and maize,” she said, adding: “I have not heard that milk from Europe or the Middle East is blocked anywhere, I only hear milk from EAC is blocked somewhere.”
Kenya on several occasions blocked goods including milk, sugar, maize, and beef and poultry products from Uganda from entering its market, over claims of origin and quality.
Mr Deo J B Kayemba, the Uganda Manufacturers Association chairperson, told the EABC team that some of the non-tariff barriers are a result of selfishness of some state actors and the failure or slow harmonisation of standards and policies.
“Some non-tariff barriers arise out of slow progress in standard harmonization because if members don’t agree on a regulation, this slows regional development,” he said.
