EABC calls for harmonisation of excise duty

The business community in the region through their umbrella organisation—the East African Business Council (EABC)—has called for harmonisation of domestic taxes, specifically excise duty to facilitate the free movement of goods and services in the Common Market. This follows various consultations recently with its members who offer goods and services that attract excise duty in the region. “Excise policies across countries define the same product but excise duty is levied differently. For instance in Kenya beer is defined by content of malt or non-malt, while in Burundi it is defined as Primus (beer brand in Burundi),” a press release from EABC reads in part. The business community says that existing differences in application of excise taxes hinder free movement of goods on which the tax is levied and also encourages smuggling, illicit trade and unfair competition in the region. EABC also notes that excise duty for alcoholic and soft drinks in Rwanda and Uganda are taxed by ad valorem method while in other EAC member countries it is specific. “This creates differences in the market consequently creating incentives for smuggling across borders with all financial implications to government and firms,” the release said. The business community wants EAC partner States to expedite the process of having a one East African Community Excise Management Act with harmonised exclusive categories of taxable goods and services to avoid distortion of prices as well as unfair playing ground to the region’s private sector. However Eugene Torero, Rwanda’s Deputy Commissioner General in charge of Customs, says the Community is yet to begin discussion on harmonisation of the tax policy. “The treaty of the Community and Common Market Protocol provides for harmonisation of tax policy. Already the EAC Council of Ministers has agreed on this and a working group has been formed to work on this at the community level,” Torero told Business Times yesterday. However, he stressed that although principles of taxation will be harmonised, the business community should not expect harmonisation of tax rates. “The tax rates cannot be harmonised because they are determined depending on the budget requirements of the respective countries in the community. Even in the European Union they do not have the same tax rates, this is why they are called domestic taxes not community taxes,” he argued. He further said that firms with operations across the region will only be taxed once on their annual incomes under the EAC double taxation treaty that is also currently under negotiation. “It is now in the process of discussion at ministerial level but at least Partner States have committed to it,” he added. Under the double taxation treaty an income which has already attracted any form of taxation in the signatory country cannot be subjected to another levy by any of the countries involved. In the EAC common market, each country has undertaken to track and collect its own custom revenues after failing to agree on a common collection mechanism. The region has finalized plans to roll out one-stop border posts to allow national revenue officials to work under one roof at all border points, each tracking revenues to their country. Ends

News

EABC calls for harmonisation of excise duty