Kenyan exports to the region are likely to continue attracting high tariffs as East African Community member states go slow on the proposed review of the Common External Tariff.
According to some countries, the review is not top on their agenda. Instead, Rwanda, Uganda, Tanzania and Burundi have turned their attention to the promise of lower tariffs proposed under the nascent African Continental Free Trade Area (AfCFTA).
Tanzania Revenue Authority (TRA) Commissioner for Customs and Excise Ben Usaje said EAC countries were struggling with their own domestic fiscal demands, and that was why they were shelving the long-awaited review of the Common External Tariff (CET).
He said besides the other four EAC member states, Kenya, the region’s biggest economy and which has been pushing for a review of the tariff, was also grappling with its own challenges, including implementation of the recently passed value added tax (VAT) regulations.
“Since the countries participated in the AfCFTA trade negotiations, they have not shown any enthusiasm for the community’s CET.
Again, they are also struggling with their domestic tax regulation issues. Tanzania will be watching closely to see if the other EAC members will rejuvenate the CET review talks and then we will act,” said Mr Usaje.
Kenya has been on the frontline in lobbying other EAC countries, especially Tanzania, to speed up the tariff’s review process.
In 2005, when EAC countries adopted a Customs Union, they committed to the current CET.
The CET comprises a triple band structure where raw materials and capital goods traded among EAC countries do not attract any tax.
The second structure is for intermediate goods used to process a final product. For example, the sugar that is used to produce final products such as confectioneries attracts a 10 per cent levy.
The third structure is where the final, manufactured products that are traded among the countries attract a 25 per cent levy.
But member countries, especially Kenya, have been pushing for a fourth structure in the tax band, where final products produced through raw materials imported from foreign markets outside the EAC domain are treated in the same way as final products manufactured using local raw materials.
These would be subjected to a 25 per cent tariff instead of the current 30 per cent they currently attract.
“The common narrative in East Africa is that Tanzania has been the stumbling block of a review of the CET because of its constant levy disputes with Kenya, but that is not the case,” said Usaje.
In the latest trade spat, Tanzania would continue levying 25 per cent tax on confectioneries from Kenya until it was satisfied that the industrial sugar used to manufacture the sweets, biscuits and chocolates is not zero-rated.
The CET review was supposed to be completed by June 1, 2019, but according to Usaje, the deadline could be extended indefinitely.