EAC under pressure to extend special trade window

Concern has been mounting over the possible impact of the scheme on the regional market, but some studies have indicated that it has acted as a driver of trade while at the same time increasing revenue losses for member states. The EAC Secretariat says the number of firms seeking duty remission and exemption schemes have been steadily growing, leaving in its wake a negative impact on tax revenues.

The value of goods that qualified for exemption and duty remission in Kenya increased by 71.2 per cent to $1,370.8 million in 2006 compared to only $588.8 million in 2004. That figure rose by 36 per cent in Tanzania from $ 798 million in 2004 to $1,225.9 in 2006 while Uganda’s grew from $109.8 million in 2004 to $178.8 million in 2005 before falling to $174 million in 2006.

During the same period, value of duty forgone rose by 14.3 per cent in 2005 to $289.5 million in 2006; Tanzania’s by 36 per cent to $405.4 million and Uganda’s by 9.9 per cent to 36.4 million in 2006.

EAC Director General in charge of customs and trade Peter Kiguta appealed to partner States to “show their commitment to the Customs Union” by refraining from activities that are protectionist, such as imposition of taxes and levies of equivalent effect to tariffs. 

“They should also refrain from granting duty exemptions outside the current customs regime because failure to do so will jeopardize the impact of the region’s CET,” he said.

The Customs Union protocol allows member states to import industrial inputs and raw materials duty free through the respective Export Promotion Schemes to manufacture goods for export outside the EAC.

However, up to 20 per cent of the goods produced annually by a company benefiting from the export promotion schemes is allowed into the EAC market after payment of applicable import duties, levies and other charges provided for in the EAC Common External Tariffs.