Rwandan traders yet to benefit from the Customs Union

Although Rwanda recently joined her East African Community (EAC) counterparts to advance regional integration by launching the Common Market that will allow free movement of people, goods and services in the region, for most private businesses the process of regional integration has yet to bare tangible benefits. Since July last year, Rwanda started implementing EAC Customs Union, a regional trade arrangement that allows goods originating from the four Partner States to enter into the Country duty free. In essence, joining the Customs Union should have led to lower prices, as goods from fellow Partner States are duty free. But according to a mini –survey around Kigali City done Business Times, the business community dealing in cross border trade in the region say they have not benefited from the lower tariff band structure resulting from the country implementing the EAC Customs Union. As a result prices of most products specifically those manufactured in the region have remained unchanged with some being hiked instead. “When Rwanda joined the EAC Customs Union we were promised that taxes would go down. But nothing much has changed; in fact new taxes have been introduced,” says Innocent Niyibizi, a general merchandise trader in Kigali’s trading hub-Mateos. Niyibizi noted that prices of consumer goods such as processed milk, juice; soap and cooking oil which are made and imported from neighboring countries of Uganda and Kenya have remained high discouraging both traders and buyers. For instance the price of a 5 litre jerrycan of Sun Sip juice from Uganda has remained at Rwf7,000 while the price of a dozen of Mukwano Blue laundry soap also from Uganda has gone up from Rwf7,300 to Rwf7,600. “We still import goods around the region expensively; the Customs Union has not helped us. Taxes are still high and these days taxes are changed regularly though they are always going up not down,” he said. Yet under the EAC Customs Union, Rwanda adopted a three band common external tariff structure allowing importation of raw materials and capital goods at zero percent, intermediate goods at 10 percent and finished goods at 25percent. Sensitive products like milk (cream), wheat flour, maize flour, rice, sugar, cigarettes, cement match boxes, worn clothing and batteries attract a common tariff. For intra regional trade, the import duty (internal tariff rate) ranges between zero percent and 25 percent with a gradual phase down to zero percent by 2011. “Look on any supermarket shelf in Rwanda and many products will be from Uganda and Kenya. But most of these products are still expensive because the prices have not changed,” said Claudine Uwera, a whole sale trader. Uwera admitted that while the final price of a good may not be simply determined by the tax structure, she says a reduction in taxes could make products relatively cheaper and affordable. “ The Customs Union and now the Common Market exist on paper but for us nothing has changed , taxes are still the same ;very high . The idea of regional integration is good but we would like to see it operational,” said Byukusenge Francois, who runs a retail shop. For most traders the only product whose price has gone down is rice imported from Tanzania which dropped from Rwf17500 to Rwf11500 for 25kg. However Eugene Torero, the Deputy Commissioner General in charge of Customs, maintains that the tax body has been following guidelines of the EAC Customs Management Act since July last year. “Goods from the Community that comply with the rules of origin criteria enter duty free. But there has to be proof shown by certificate of origin,” he told a press briefing recently during the launch of the Common Market in Rwanda. Torero also said customs taxes aside, Rwandans still have to pay all their domestic taxes. For instance the Value Added Tax (VAT) of 18 per cent and all other consumption taxes remain in full effect. He further stressed that although principles of taxation will be harmonized, the business community should not expect tax rates also to be harmonized in the region. “The tax rates cannot be harmonized because they are determined depending on the budget requirements of the respective countries in the Community. Even in the EU they do not have the same tax rates,” he argued. Despite the worries about, most businesses support the move to a Common Market and are keen to see an end to the delays and costs of getting their goods across borders. Ends