Common Market treaty to be signed next week

By Luke Anami

A date has finally been set for the signing of the much-anticipated East African Community Common Market Protocol.

The protocol will be signed on Thursday, next week, by regional Heads of States in Arusha, Tanzania.

After the signing, a team of experts is expected to design ways of addressing key administrative challenges before the protocol is implemented.

The Permanent Secretary in the Ministry of EAC, David Nalo, cited the application of the common external tariff and the rules of origin, as some of the major challenges.

The PS said one of the concerns raised by the business community and investors, is double taxation.

"Already the business community is pushing East African Community to have double taxation agreement, in a move to protect investors," he said.

"Proposals on what practical actions are needed to address these issues were discussed and arrived at last month," said Nalo during a media briefing in his office.

Cushion investors

Nalo said failure to harmonise taxation laws within the bloc had also delayed the process.

Double taxation agreements are designed to cushion investors from being taxed more than once within the same economic zone, upon repatriation of the business entities.

"Double taxation rates have been defined by member states although an agreement has not been signed," added Nalo.

Member states have reduced withholding tax to 5 per cent and royalties to10 per cent.

The double taxation treaties are expected to market EAC as a single investment destination to investors.

"These agreements allow investors to pay taxes in their country of residence, enjoying exemption from taxation in the other country," Nalo explained.

He explained that a surcharge would be imposed on imports from other regions, so as to protect indigenous industries.

Numerous challenges

Nalo pointed out that skewed distribution of benefits, and the need to put in place an efficient mechanism for sharing benefits and compensating losers, was another challenge.

He said concrete measures have been put towards the integration, including freely exchangeable currencies, and ultimately a single currency and a double taxation accord.

"This will be achieved through the establishment of a Customs Union as the entry point of the Community, a Common Market, subsequently a Monetary Union, and ultimately a Political Federation of the East African States," said Nalo.