EAC States advised to rethink tax incentives

By Lillian  Kiarie

East African countries have been cautioned against giving excessive tax incentives to businesses to attract  higher levels of Foreign Direct Investments into the region.

East African Development Bank (EADB) Director General, Vivienne Yeda said such wide ranging tax incentives are leading to large revenue losses and are not necessarily needed to attract the investments.

She said the relationship between investors search for risk-adjusted profits and the host States’ expectation of revenue, skills transfer, development of infrastructure and job creation do not usually converge.

“The pillars for balancing these interests should be established in the applicable legal and fiscal regimes of the respective countries and must be well defined and documented in the investment agreements,” she said.

Ms Yeda was speaking at a high level training workshop for public sector lawyers and law professors on structuring and negotiating international commercial contracts and agreements yesterday.

She said public sector lawyers and law professors were in a special position to determine the future of the region’s extractive industry.

As advisors to their governments, Yeda observed, the lawyers had the opportunity, the influence and the resources to deliver a brighter future for the region if only they remained vigilant and sharpened their skills and negotiation prowess.

“With a stroke of a pen, you can determine the destiny of a generation,” Yeda told the training meeting organised by the regional bank in partnership with global law firm, DLA Piper. She said the fundamental question that must be asked today is whether the region would benefit from its resources. 

“Going by the experiences of other resource-rich regions, how can East Africa ensure the resources  become tangible wealth for its people and future generations?” she posed.