Scrap discriminatory taxes, EAC countries told

THE East African Business Council (EABC) has reiterated the need of EAC member states to eliminate discriminatory taxes with a view of boosting investments.

The regional business council argued through a Webinar that persistence of discriminatory taxes is creating a non-level playing field between domestic goods and similar imported goods from the other EAC states.

“I urge the Governments of EAC Partner States to adhere to Article 15:2 of Customs Union Protocol that states “No Partner State shall impose, directly or indirectly, on the products of other Partner States any internal taxation of any kind in excess of that imposed, directly or indirectly, on similar domestic products,” said EABC Chief Executive, John Bosco Kalisa here on Monday evening.

Mr Kalisa urged the governments to remove discriminatory taxes and expedite the harmonization of domestic taxes in the EAC to attract more cross-border and foreign direct investments.

According to Mr Kalisa, unharmonised taxes distort intra-EAC trade and cross border investments and frustrate the free movement of goods, services, service suppliers and workers.

Other repercussions include an unlevelled playing field for business and difficulties in marketing the EAC bloc as a single investment destination, he said.

Harmonization of domestic taxes is provided for in all stages of the EAC integration. However, partner states have achieved little in this regard.

The EAC Agreement on Avoidance of Double Taxation agreed upon in 2010 has only been ratified by Uganda and Rwanda.

Preliminary findings of the study show the excise duty rates across the EAC region are generally on the high and have a ripple effect on the cost of doing business.

It also shows that Electronic Tax Stamp (ETS) is high for manufacturers.

For instance, ETS has been introduced on carbonated soft drinks in Tanzania since August 2019 at 3.60 US dollars per 1000 stamps.

It would later be fixed at 8,082.62/- per 1000 stamps.

As a result, businesses have been incurring significant additional costs to manufacture, resulting in loss of margins and difficulty to support their working capital requirements.

The study recommends removing excise duty on all, non-harmful goods, and services such as telecommunication products and services as well as financial services.

The webinar on Discriminative Taxes and Harmonization of Excise Duties in EAC was attended by over 130 actors who validated the study findings.