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East Africa Common market yet to take off
Publish Date: Jul 05, 2010
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By Ibrahim Kasita

JAMES, a local trader, expected to move freely with his goods and capital without being taxed across the borders of Uganda, Kenya, Tanzania, Rwanda and Burundi when the East African common market took effect July 1.

He, like other East African residents, hope that the removal of trade barriers will promote close economic ties across the region.

But their dreams will have to wait a bit longer. Taxes will still be levied on goods and services crossing the borders, Uganda Revenue Authority (URA) said yesterday.

“There was exaggeration when people were told that there will be no payment of taxes. Taxes on goods produced in the region will be still collected in the same way we were doing before,” Peter Malinga, the commissioner in charge of customs, said.

The establishment of the East African common market is supposed to lead to free movement of goods, persons, labour, services and capital.

The overriding objective of the common market is to deepen co-operation among the partner states, in both economic and social fields, for the benefit of citizens of the member states. The common market took effect on July 1.

But the commissioner argued that there were issues still being discussed by the member states before the fully-fledged operationalisaton of the common market.

The issues, he pointed out, were whether or not goods should move freely within the common market once taxes have been collected at first point of entry.

“We need to determine whether to have a central system of revenue collection and a mechanism to share collected revenue or to maintain the current system,” Malinga explained.

“There is a need to harmonise other government policies that impact on the free movement of goods, labour services and capital as well as harmonisation of internal taxes such as value added tax (VAT) and excise duty.”

He explained that all goods originating from partner states are supposed to be duty-free, but such goods have to fulfill the provisions of the EAC Customs Union rules of origin in order to qualify for import duty-free.

“The prime evidence for goods to qualify for such preferential tariff treatment is an EAC certificate of origin issued by a competent authority designated by each partner state,” Malinga said.

“This certificate only exempts import duty. Any other taxes due on the goods like VAT, excise duty, withholding tax, where applicable, are payable,” he explained.

All five members of the EAC are supposed to apply the same tax rates because the region uses the common external tariffs which indicate rates charged on internationally-traded goods, the commissioner added.

“VAT and excise duties on goods imported from the partner states are yet to be harmonised in the region and will therefore continue to be applied, based on respective national legislation,” he said.

“Harmonisation of the taxation laws, rules and regulations of the five East African countries is necessary if the common market is to be fully realised.”

Uganda, Kenya, Tanzania, Rwanda and Burundi charge 18% VAT, while Kenya charges 16%. Excise duty rates in partner states are also different.

Malinga said the EAC member states undertook to ‘progressively’ harmonise their tax policies and laws to remove tax distortions in order to facilitate the free movement of goods, services and capital and to promote investment within the region.

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