Business
EAC countries propose taxes on air tickets
Publish Date: May 07, 2014
EAC countries propose taxes on air tickets
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By Moses Walubiri

The Council of Ministers under the East African Community (EAC) have proposed an imposition of a levy on air tickets purchased in the five member countries as part of a raft of measures tailored to raising revenue necessary to scale down the community’s donor dependency for its budget.

In the current financial year, the secretariat of the budding regional bloc, according to Minister of East African Affairs, Shem Bageine, is running on a budget of $135m (about sh338b) with 68% being donor funded.

Bageine on Tuesday told journalists at the Media Centre that “EAC has been deliberating on alternative mechanisms of financing to ensure timely remittance of funds to the Secretariat by the Partner States and to reduce donor dependency.”

Highlighting the key action points from last week’s 12th Extra Ordinary Summit in Arusha, Bageine revealed that the heads of states directed the Council of Ministers to “explore all possible avenues” on sustainable funding of the community and sublimit a report in November.

Another possible source of revenue under consideration is levying a percentage on the value of imports entering the region from outside the community.

However, this modality of funding has been received with apprehension, according to the Director East African Community Affairs, Lawrence Mujuni, with experts warning that such a mechanism would ultimately confer more powers to countries contributing more revenue.

 “The problem with imposing a flat import levy is that Kenya will contribute the largest chunk, followed by Tanzania, Uganda, Rwanda and Burundi in that order. There might be an attempt to turn financial contribution into influence at the Secretariat which would not be good,” Mujuni said.

Contribution of revenue accruing from import levy might correspond with the size of the economy of member countries.

One suggestion aimed at fostering an equal stake in the community is for member states to contribute 20% of the budget divided equally among member states, with the balance raised from imposing an import levy on goods outside the community.

Air transport is out of reach for majority of East Africans which might negatively affect the expected revenue from this sort of tax.

With limited air traffic in the region despite an upsurge of foreign interest in the region fuelled by tourism and brisk investment opportunities, policy honchos in the community will have to cast their tax nets wider as they seek to raise funds necessary to viably run community activities.

The community is currently in the process of institutional review with the aim of transforming its executive organ from the existing Secretariat to a Commission as the process towards integration gathers pace.

The resultant supportive institutional framework in form of a community Central Bank, Statistics Commission and Enforcement Commission, according to Bageine, will see an exponential increase in its financial requirements.

The heads of states at the Arusha summit directed the Council of ministers to expedite the process for political integration – the remaining pillar of the EAC integration.

The original EAC collapsed in 1976 with attempts to revive it picking steam in the early 2000.
 

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