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New budget bodes well for EAC integration

By Vision Reporter

Added 25th June 2015 12:16 PM

The 2015/2016 budget read recently by Finance Minister, Matia Kasaija, is once again another important policy document

The 2015/2016 budget read recently by Finance Minister, Matia Kasaija, is once again another important policy document

By Cris Magoba

The 2015/2016 budget read recently by Finance Minister, Matia Kasaija, is once again another important policy document that will propel the EAC integration agenda to greater heights.

In line with the agreed practice among the partner states, the finance ministers delivered their speeches concurrently as a one of the ways of harmonising economic and fiscal policies.

This budget will in many ways address the challenges of the business community and the many people who are looking up to the East African Community for the opportunities the integration process has created.  Although some of the pronouncements in Hon Kasaija’s budget were a continuation of the EAC agreed policy frameworks, there were nonetheless areas that came out prominently and are of immense interest to many of us involved in the EAC integration agenda.

We are all aware of the importance the government has attached to the energy and infrastructure sectors in recent years.  While this is already a vital strategic decision for Uganda, this policy will inevitably take the EAC integration to another level.   This is aptly captured in the coming financial year’s budget: “Government’s continued focus on infrastructure investment will enhance regional integration, and develop Uganda’s oil sector.  This will unlock private sector activity, stimulate growth and generate much needed tax revenues to finance other deserving needs.” All this is in consonance with Uganda’s heavy investment in trunk roads network, construction of the standard gauge railway and the invitation of the EAC Partner States to invest in the development of the oil refinery in Uganda.

Another area worth noting is the telecommunications sector. Earlier this year, the northern corridor countries agreed on the removed of excise duty on international calls and launched the One Network Area for mobile telephone communication. This was reiterated in the budget speech. As a result, roaming charges have been removed and calls originating and terminating in Uganda, Kenya, Rwanda and South Sudan are charged at the local call rates, hence, reducing the cost of cross-border business transactions from USD 18 cents to USD 10 cents per minute.

Other avenues for enhancing business have also been opened up in the transport Sector. The minister’s pronouncement regarding the motor vehicle taxation regime brings good tidings for the business community.  Prior to the budget day, the EAC Ministers of Finance held pre-budget consultative meetings to discuss issues of common interest in the spirit of furthering regional integration. According to Minister Kasaija, they agreed on a number of measures with regard to the EAC common external tariff, details of which will be contained in the Gazette to be issued by the EAC Secretariat. Some of the significant decisions for Uganda include: Authority to import road tractors for semitrailers at a duty rate of 0 percent instead of 10 percent; motor vehicle for the transportation of goods with gross vehicle weight exceeding 5 tones but not exceeding 20 tones at a rate of 10 percent instead of 25 percent; motor vehicles for transport of goods with gross weight exceeding 20 tones at 0 percent instead of 25 percent; buses for the transportation of more than 25 persons at a rate 10 percent instead 25 percent. The benefits are valid for a period of one year; therefore the private sector is encouraged to take advantage of these benefits before the expiry of this period.  

The only challenge that the business community has continued to rightly talk about is the harmonization of Domestic tax regimes. The good news is that there are on-going negotiations in this area, which once completed, will further smoothen the functioning of the Customs Union, Common Market, Monetary Union and the whole integration process. The harmonisation needs referred to include value added taxation (VAT), excise duty, and income tax.

Harmonisation of domestic tax regimes in the EAC is in line with the requirements of Article 32 of the Common Market Protocol which has registered far-reaching consequences for trade flows and factor allocation within the Community. The Article provides that “the Partner States undertake to progressively harmonize 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 Community”.

It should also be noted that a harmonized tax policy would benefit the regional integration process by providing a conducive environment for tax administration and encouraging tax compliance.

As Ugandans therefore, we need to take heed of the minister’s counsel to the business community. We need to position ourselves in order to tap into the legal and policy frameworks created by the EAC which continue to unfold. 

The minister notes, and rightly so, that “this budget is aimed at reducing the cost of doing business and be competitive in an expanded East African Community Market”. He also implores us to take advantage of it to make profits, expand businesses, create jobs and ultimately contribute significantly to the growth of the economy.

The writer is the principal public relations officer of the Ministry of East African Community Affairs

New budget bodes well for EAC integration

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