NAIROBI, KENYA: Pressure is pilling on Tanzania and Burundi to ratify tax harmonisation agreement signed eight years ago to boost trade among East African Community partner states.
East African Business Council noted that slow pace in ratifying the document makes it difficult for Kenya, Uganda, and Rwanda to implement the agreement which would make it attractive for businesses to expand operations in East Africa.
“We have witnessed a decline in intra-trade among the Partner States as many companies shy away from expanding within the region due to the fear of double taxation, this needs not to be the case as we have a document to address all these,” said Adrian Njau, East African Business Council Trade and Policy Advisor.
“The EAC business community eagerly awaits harmonisation of domestic taxes in EAC and hopes to see in harmonization removal of tax distortions that hamper efficient allocation of resources within the Community and come in the way of free movement of goods, services, labor, capital, and investments within the Community,” he added.
The East African Business Working Group on domestic taxes identifies several challenges in tax harmonisation among them reluctance of Partner States to move with speed and finalize the legal framework for tax harmonisation, and fear by governments that tax harmonization may deplete revenue base especially in the case of excise.
Other challenges are reluctance by stakeholders to provide data that would enable the working group and government stakeholders to quantify the actual impact of tax harmonisation, Strong lobby by some private sector stakeholders against tax harmonization due to fear of competition, and the inconsistency of composition of negotiating teams.
Speaking during a press briefing in Nairobi, East African Business Council Ambassador Peter Mathuki called for a political goodwill in convincing Burundi and Tanzania to ratify the double taxation agreement to unlock business potential of the region.
“Harmonisation of domestic taxes will, subject to implementation of necessary safeguards, enable Partner States to collect more revenue and increase intra-regional trade and investment, protect domestic tax base, increase of economic competitiveness of the region and strengthen political ties among the Partner States,” he noted.
The Policy Paper on EAC multilateral tax treaty was supported by GIZ in response to a request from EABC Secretariat due to long delay by EAC Partner States to ratify the EAC Agreement for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income. The Agreement was signed by five-EAC Partner States on November 2010 but so far, it’s only Rwanda, Kenya and Uganda who have ratified the agreement
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