NAIROBI, KENYA: The East Africa Community (EAC) Partner States will have a harmonised tax system by April 2015, a senior government official has said. Cabinet Secretary in the Ministry of East African Affairs, Commerce and Tourism Phyllis Kandie told a media briefing in Nairobi that negotiations are currently ongoing at the ministerial level.
“We shall begin by harmonising the Value Added Tax (VAT) and the excise taxes,” Ms Kandie said during the launch of the 2014 Taxpayers week on Monday.
Tanzania, Uganda and Rwanda have a VAT rate of 18 per cent, while Kenya’s figure stands at 16 per cent. The economic bloc also has different levels of taxation across same industries.
Ms Kandie said while Tanzania has suspended levying tax on its tourism sector, Kenya has introduced VAT on the sector. “What is important is that we have agreed as a region on the need for uniform tax systems across the five partner States,” she said.
Kandie noted that tax harmonisation will make cross-border trade easier for the private sector. “Our aim is to ensure that intra-EAC trade reaches the level of other trading blocs such as the European Union,” she said.
Kenya Revenue Authority (KRA) Commissioner General John Njiraini said the best approach to the harmonisation of EAC taxes will be implementation in phases. “The first step is to agree on the maximum and minimum limits allowed for the taxes,” Njiraini said, noting that there are differing tax administration practices across the EAC states.
“All the region’s tax agencies will need to sit down and agree on the unified framework on how to engage taxpayers and carry out audits,” he said. The KRA boss noted that a unified tax regime will reduce the incentives to evade taxes for firms operating across the different countries.