All the six regional East African Community member states recently read their budgets for the 2021/2022 financial year with the common theme of social economic transformation following the effects of the Covid-19 pandemic.
But the lack of harmonisation of their tax regimes is a concern for many stakeholders.
This they say results in unnecessary trade competition which paves way for protectionism, which threatens regional integration. Article 32 of the EAC Common Market Protocol provides for the harmonization of tax policies to remove distortions and facilitate the movement of persons, goods and capital, to promote trade and investment, while Article 8 of the EAC Monetary Union Protocol provides for harmonization of fiscal policies for the avoidance of harmful competition.
But a study of the tax systems in the EAC by the Southern and Eastern Africa Trade Information and Negotiations Institute, SEATINI, found that the main impediment to implementing this is the failure to apply the EAC Code of Ethics and fear of losing national revenues among others.
The report indicates that unlike the Common External Tariff (CET), where amendments have to be approved at EAC level, Domestic Tax amendments are done in isolation, something regional trade and investment analysts in the meeting referred to as problematic.
“There are only a few cases when domestic tax laws are discussed at the EAC level such as in 2018, when partner states agreed not to levy VAT on some essential goods and services that are consumed domestically such as medical supplies and educational materials,” the executive director of SEATINI Uganda, Ms Jane Nalunga, said during the post EAC Tax and Budget Dialogue FY 2021/22 in Kampala on Tuesday.
Taxes that have caused controversies in the region include excise duties on goods produced within the region, as well as the varying rates of Value Addition Tax and recently, Capital Gains Tax.
Kenya, for example, charges a VAT of 16%, while the rest of the countries impose 16% on the products produced within their countries and later sold to other partner countries.
The Ministry of Finance, Planning and Economic Development and the Uganda Revenue Authority agreed that there is a need to quickly centralize the collection of government revenues within the East African Community.
The Commissioner of Economic Affairs at the EAC Affairs Ministry, Leonard Kizito Ojara, said Uganda as a member is ready to implement policies geared towards the harmonization of the policies because the government knows its implications.
The Commissioner of Economic Affairs at the EAC Affairs Ministry, Leonard Kizito Ojara, says Uganda as a member is ready to implement policies geared towards the harmonization of the policies because the government knows its implications.