East African countries under the aegis of EABC have pushed for the harmonization of taxes in the sub-region
East African Business Council (EABC) as part of its efforts to ensure the free movement of goods, services, capital, and workers has authorized a study on the harmonization of excise duty in the region.
For years now, the East African Community (EAC)-intra-trade has been hopelessly stuck at 15% of the total trade with the rest of the world, so the EAC is hoping to improve things with this study.
A Background of the Study
The authorization of this study was recently revealed during the East EAC private sector consultative meeting on the 2022/23 post-budget and sensitization on the Common External Tariff (Cet).
Disclosing the new development, trade, and policy advisor with the EABC, Adrian Njau said the consultant will examine excise duty across the region, ask for the views of member states, and devise recommendations on how to proceed with the execution.
He revealed that the body has decided to begin with the excise duty because it is more challenging compared to other forms of taxes.
Mr. Njau revealed that once the excise duty has been harmonized, the body will be going after Value Added Tax (VAT), while taxes such as income tax and tax incentives will follow respectively.
He recommended that the body quickly begin harmonization of taxes, given that in 2018, the EAC partner states adopted the EAC policy for the harmonization of domestic taxes.
He further recommended that the partner states find a way to improve the human and financial resources of the fiscal and monetary department at the EAC secretariat to enable steering of the tax harmonization process, and suggested that they actively involve the private sector.
Mr. Njau also suggested that the private sector should agree on the harmonization of domestic taxes, which should go in tandem with the scrapping of all discriminatory domestic taxes in the region as they are against treaties and protocols.
CTI’s Perspective
Also speaking on the matter, Confederation of Tanzania Industries (CTI) vice chairman Hussein Sufian said unlike at the national level whereby the private sector submits tax proposals, private sectors at the regional level have not been submitting harmonized tax proposals in recent years.
He explained how this has aided the existence of the disparity of tax measures and hampered the harmonization of domestic taxes as well as misshapen the EAC Cet which is supposed to be equally applied by the EAC partner States.
He attributed the failure to submit the private sector harmonized tax proposals to the lack of a platform whereby the EAC private sector could mean, harmonize their tax proposals, and jointly submit it 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 stated that tax disparity within the region was harming the welfare of the citizens because it has a direct impact on consumer goods.
He blames the difficulties in the harmonization of taxes on the government’s fear of losing sovereignty on tax matters, as suggested that if possible, the engagement in the harmonization of taxes should involve both parties—the government and private sector.
The investment specialist-business environment with the Private Sector Foundation Uganda, Mr. Eric Sempambo also implored the member states to speed up the harmonization process, as it is the citizens who are suffering the consequences of tax disparity.
He further blamed discriminatory taxes within the region on its competitiveness and asks that the government find a way around this.
