A tax harmonisation campaign has kicked off as part of efforts to ensure a faster intergration process of the East African Community (EAC).

In a meeting held recently at the East African hotel in Arusha, Tanzania, EAC partner states came up with a work plan for 2009 that will primarily avail measures on how tax distortions among partner states can be avoided.

According to the work plan, harmonisation will not stipulate similar tax rates for partner states, but will aim at harmonising policies too, among other objectives, making doing business easier and to facilitate greater investment in the region.

"We were specifically looking at how the divergent tax procedures can be harmonised in all domestic taxes of partner states and how their implementation can be treated in the same way,” Hadija Murangwa, the Director of Legal Affairs in Rwanda Revenue Authority said.

Kenya charges VAT (Value Added Tax) at the rate of 16% on manufactured goods while Uganda and Tanzania levy 20% and 18% respectively.

Murangwa said that the campaign will not lead to benefits of a single partner State, but will ultimately remove any hinderances for any East African wanting to do business accross the region.   

With harmonisation of taxes, apparently, it will be much easier for a Kenyan trader to do business in Rwanda as policies that include exemption of taxes, and other tax procedures will be harmonised.

Once this has been achieved, many believe harmonisation of tax policies in the region will reduce corruption due to increased efficiency and transparency of tax administration, and also lead to job increases in production, trade and services.  

Harmonising taxes is in line with the ambitious plan of the EAC as mentioned in article 83 of the EAC treaty, and also focuses on creating a common East African market by 2010.

The campaign comes at a time when its important to have a transparent and understandable tax legislation system and procedures that will lead to an efficient allocation of resources with the EAC.

EAC countries established a customs union in 2005 and are working towards the establishment of a common market by 2010 and subsequently a monetary union by 2012.

The workshop was attended by high ranking officials from the Ministry of Finance and Revenue Authorities of the five partner States as well as delegates from the private sector.

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