Opinion
Double taxation a stumbling block towards trade boost in EAC
Publish Date: Aug 15, 2014
newvision
  • mail
  • img

By Mbabazi Peninnah

The Common Market Protocol is a significant step towards the achievement of the next milestones in the integration process which was signed on 20th November 2009 by the five East African Community partner states: Burundi, Kenya, Rwanda, Tanzania and Uganda.


The Common Market Protocol aimed to provide free movement of goods; labour; services; and capital, which will significantly boost trade and investments and make the region more productive and prosperous.

With the integration process still in progress, it’s becoming a challenge to boost trade within the East African Community because of the double taxation. The double taxation occurs when two different countries levy a similar tax on the same transaction or income.


For instance, under the current tax laws of EAC member states, a company with a branch in another country within the region faces the dilemma of being taxed twice on its annual income; it will pay corporate tax both at the branch in the host country and at the parent company in the country where it is headquartered. Despite the fact that there is a non-double taxation treaty among EAC members that requires companies to be taxed only once, this has not been to be implemented.


A double taxation treaty means that an income which has already attracted any form of taxation any form of taxation in the signatory country cannot be subjected to another levy by any of the other countries involved. It is only Rwanda that has ratified the EAC agreement on Double Taxation Avoidance (DTA) which was signed in September 2010, and was to be implemented within a year.


Consequently, Double Taxation treaties reduce the tax burden on tax payers involved in transactional-businesses. The implementation of a Double Taxation treaty within the EAC bloc will boost in regional trade.


The advantage of the treaty to companies would enable them to expand their operations throughout the region, creating numerous jobs in the process given the significantly lower tax burden they would be subjected to. This will enable companies to re-invest in their enterprises. A double tax treaty will provide certainty to investors who will bring more cash flow into the country encouraging more economic growth within the country.


However, while the EAC countries are cautious about implementing the DTA, most have similar arrangements with other countries outside the block. Uganda shares a non-double taxation treaties with the United Kingdom, Zambia, Denmark, Norway, South Africa, India, Italy, the Netherlands, Mauritius and Belgium while Kenya has such ties with India, Denmark, Germany, the United Kingdom, Sweden, Zambia, Norway and Canada. Rwanda has agreements with South Africa, Belgium and Mauritius. Tanzania has signed tax agreements with South Africa, Canada, Denmark, Finland, India, Italy, Norway, Sweden and Zambia. Burundi has no such tax agreements.


Double taxation is a stumbling block threatening intra – EAC – trade in the region and the full implementation of the EAC common Market Protocol. The purpose of the double taxation is to lower a worsening tax burden and boost cross-border movement of capital. The EAC still dithers over the Double Taxation Agreement, which is a blow to the economy.


It places financial burdens on firms with a cross-border presence and hinders the regional movement of capital. 


The matter towards delay over the implementation of the DTA treaty needs to be addressed as its becoming increasingly impossible for businesses to sustain operations across the region. The law makers in the East African partner states to align tax laws with the Double Taxation Agreement Protocol.

The writer works at Uganda Debt Network

Related Stories

No tax holidays for investors under EAC

Tax agencies trained in EAC customs handling

EAC countries propose taxes on air tickets
 

 

The statements, comments, or opinions expressed through the use of New Vision Online are those of their respective authors, who are solely responsible for them, and do not necessarily represent the views held by the staff and management of New Vision Online.

New Vision Online reserves the right to moderate, publish or delete a post without warning or consultation with the author.Find out why we moderate comments. For any questions please contact digital@newvision.co.ug

  • mail
  • img
blog comments powered by Disqus
Also In This Section
Give your heart to god
At the heart of the city of Kampala stands a church in honor of Christ the King. The statue just outside the Church conveys the nature of his Kingship. He is a humble Servant King, appealing to everyone’s reception....
What to expect from the national health insurance
Health Insurance is attracting more and more attention in low and middle income countries, Uganda inclusive. It is indeed pretty worrying that only about 3% of the Ugandan population has health insurance....
Post-Soviet confidence games
It is starting to look like a pattern. After painstaking talks, the parties in the Ukraine conflict come to an agreement – only to have it fall apart or fail to be fully implemented....
The Fed’s culture war
At a closed-door conference attended by senior bankers, regulators, and some academics, Federal Reserve Governor Daniel Tarullo and Federal Reserve Bank of New York President William Dudley used their bully pulpit to do something unexpected....
Key gaps in the national environment regulations
Uganda since 2005 has discovered huge oil reserves in the Albertine graben amounting to more than 3.5 billion barrels of oil....
Commend Bigirimana for his fight against corruption
I wish to start my article with a quote about corruption from Frank Serpio: The fight for justice against corruption is never easy and never will be. It exacts a toll on ourselves, our families, our friends and especially our children. In the end, I believe as is in my case, the price we pay is we...
Should Govt lease parts of Lake Victoria to private developers?
Its Ok
No Way
Not Sure
follow us
subscribe to our news letter