The private sector in the East African Community has proposed the harmonisation of several taxes including value-added tax, income tax and excise duty in the 2022/2023 budget, arguing this will ease the cost of doing business in the region.
“Tax harmonisation is extremely important for all of use as East Africans. Tax matters impact businesses and most importantly impact our people,” said Simon Kaheru, the East African Business Council (EABC) chairperson, Uganda chapter.
“What matters for us is to see a pro-people budget in all of East Africa in the 2022/23 financial year.”
Kenya has already unveiled its budget due to the upcoming elections in August. But Tanzania, Rwanda and Uganda will unveil theirs in June. Burundi is yet to align their budget same as South Sudan and the latest entrant DR Congo.
However, the budgets will all be effective starting July 1.
“We want to see harmonised taxes so that we have positive effects on the rights and freedoms of people and businesses in East Africa. This will enhance the integration of the East Africa region,” said Mr Kaheru.
He added that the harmonisation of domestic tax rates will enable partner states to move ahead together as a bloc.
Each partner state is expected to charge the same VAT percentage on goods.
As far as excise duty in the EAC region is concerned, the EABC wants to see rates that will lower the cost of doing business.
Tanzania charges excise duty on fewer services compared with the rest of the region. Indeed, excise duty is applicable to telecommunications as well as to financial institutions.
For telecommunication firms, there are two different duties that are applicable. A duty of 17 per cent is applicable on data and airtime making it expensive for telephone calls from out of Tanzania.
In Uganda, excise duty is 12 per cent for data and airtime while in Kenya the rate applicable is 20 per cent. Rwanda is 10 per cent.
When it comes to money transfer, Tanzania charges excise duty at the rate of 10 per cent, Uganda is at 15 per cent for money transfer as well as an additional 0.5 per cent on the value of the transaction at the time of withdrawing the money.
For Kenya, money transfer attracts an excise duty of 12 while Rwanda at 10 per cent.
In Uganda, there is an additional rate of 0.9 per cent per dollar per minute that applies to all incoming calls.
The EABC wants excise duty curbed at 10 per cent in all the EAC partner states.
“A good tax regime is one that has the following components; convenience, flexibility, equity and optimal economy. These should guide the reforms in terms of harmonisation of domestic tax in the East African region,” said John Kalisa, CEO, EABC.
“The private sector wants the excise duty harmonised in the region to allow for cheaper telephone calls and lower charges on communication.”
On banks, Tanzania charges excise duty at 10 per cent (fees and commission), Uganda at 15 per cent, Kenya at 20 per cent and Rwanda does not charge any.