Countries in the East African region, particularly Kenya and Uganda, have expressed their pain regarding the law raising import taxes on goods from non-EAC countries to 35 percent.
Kenya and Uganda have led a diplomatic protest, decrying the unexpected negative effects of the new East African Community Common External Tariff (CET) band. Many businesses are starting to feel the heat, and the threat of depleting tax returns is mounting.
Both countries presented official complaints to the East African Business Council (EABC); the regional lobby, stating that certain basic commodities outside the band have also been affected.
Recall that the CET was passed to promote regional integration through equal treatment of goods imported from third parties, and also to shield local manufacturers against competition from similar goods imported from outside the region.
Experts say a 35 percent duty on imported finished products has the potential to grow intra-EAC trade by $18.9 million. It will also help generate more tax and create many job opportunities.
Goods Affected
Some of the products that were covered by the band include dairy and meat products, cotton and textiles, iron and steel, edible oils, furniture, leather products, fresh cut flowers, fruits and nuts, sugar and confectionery, coffee, tea and spices, textiles and garments, headgear, ceramic products, and paints.
The two East African giant’s main concern is how this band has raised the cost of importation which is starting to affect basic commodities.
According to EABC’s Chief Executive, John Bosco Kalisa, Kenya is mostly worried about wood products while Uganda’s concern is about industrial sugar.
Kenya’s Concerns
A trusted report has it that following the ban imposed on logging, Kenya has been importing wood from EAC partner states, but now, due to the CET band, the price of imported wood is the same as that of finished furniture already on the market.
One of the furniture manufacturers in Kenya, PG Bison Kenya Ltd had revealed in a national publication to its customers that these policy decisions have compelled it to raise the price of products.
Uganda’s concerns
Uganda is having trouble exporting excess industrial sugar within the region yet Rwanda and Burundi are experiencing a shortage but if they both decide to take the excess industrial sugar off Uganda’s hands, their needs still won’t be met since they are net importers.
EABC’s chief executive, John Bosco Kalisa noted that it is too early to determine the full impact of the new import taxes and that there is no point in increasing the prices of goods that are available in the region.
The reaction of the Kenya Association of Manufacturers, KAM
EAC states domesticated the new tax measures in the Finance Act 2022, which became operational on July 1.
The Kenya Association of Manufacturers (KAM) blamed the Act for the high cost of living in the country.
According to KAM Chairman, Mucai Kunyiha, some of these tax measures are unlikely to instigate development in the agriculture and manufacturing sectors.
A while ago, in an attempt to increase supply to millers and in turn, lower the cost of maize flour, Kent relinquished the import levies on maize but unfortunately, this didn’t make much difference due to the variance in taxes charged on commodities by EAC states and new taxes on imports.
During a webinar on domestic tax regimes and proposed measures for 2022/23 budgets for the partner states, EABC advised harmonized taxes in the region to enhance intra-EAC trade.
With this in effect, all member states are expected to levy 35 percent on goods manufactured outside of the region that can be produced locally.
