EABC, Stakeholders Call For Regional Tax Reconciliation

EABC, Stakeholders Call For Regional Tax Reconciliation. John-Bosco Kalisa, the East Africa Business Council (EABC) executive director, has urged governments to speed up the reconciliation of East African Community (EAC) macro-economic goals.

He made this appeal at a recent webinar on the pre-budget 2024/25 scenario, concentrating on the convergence and divergence of tax proposals across the EAC trading zone.

Kalisa urged reconciliation of domestic taxes to better the business predictability of the zone, promoting intra-EAC trade and investment, pointing out that Tanzania, Kenya and Uganda share a common % corporate tax rate of 30%.

EABC, Stakeholders Call For Regional Tax Reconciliation: More Perspective

According to him, Rwanda offers a marginally lower rate at 28%, which could impact the decisions of major companies in terms of the location of huge investments.

Tanzania and Uganda offer simpler structures for withholding taxes with a flat rate or a tiered system of up to 20%, with Rwanda’s rate fixed at 5% and 15%.

Also weighing in, Adrian Njau, the EACB trade and policy advisor, mentioned that Tanzania and Kenya offer lower rates for service or management fees for residents as opposed to the rate for non-residents, which is 15%, whereas Uganda on the other hand, sets 6% for residents and 15% for non-residents.

He continued that Rwanda maintains a flat rate of 15%, pointing out that these differences don’t align with the EAC policy on the unconstrained movement of services, as service providers providing cross-border services are treated as non-residents.

There is, therefore, the need to take into account various withholding tax rates when setting prices for their services, with an impact on services intra-trade and competitiveness.

Additionally, VAT on local goods and services don’t seem to be equal, with Tanzania applying a changeable rate of 18% on most goods, in addition to a lessened rate of 15% on some crucial goods.

Uganda and Rwanda maintain, on the other hand, a standard rate of 18% while Kenya maintains a lower rate of 16%.

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A Background on Rates

Another issue of disparity is the Excise duties on services, Tanzania, Uganda and Kenya have explicit rates for different services, whereas Tanzania charges telecommunication companies and payment service providers at 17%.

According to Njau, a rate of 15% is imposed on telecommunication companies in Uganda, while pay-to-view television services are charged 5%.

Kenya charges 15% on telecommunication services and 20% for specified fees, and charges imposed by financial institutions.

In Rwanda, excise duties on services are widely set at 15%, except telecommunications services, which are set at 10%.

Tax advisory companies demanded alignment of the budgetary cycle in EAC partner states for quick engagement of the private sector, to compose fiscal proposals to enhance the trade and investment environment.

Experts at PricewaterhouseCoopers (PwC), an audit firm, affirm that the private sector’s proposals on Tanzania’s budget encompass streamlining tax administration processes.

These involve making clear dispute resolution procedures, fast-tracking VAT reimbursements and aligning objection admission timelines.

Notably, there’s a demand for tax reforms to aid small and medium enterprises (SMEs), including a decrement of the corporate income tax (CIT) rate to 25% and excluding SMEs from the skills development levy (SDL).

Also, proposals advocate for a progressive decrement in social security contributions over five years and exclude some items from value-added tax (VAT) to incite environmental conservation.

Furthermore, efforts are being made to modernize the Excise Duty Act, with prompt victories like lowering excise duty rates on telecommunications services and making clear VAT thresholds for digital services.


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