Heads of State Summit held last week resolved that the Secretariat’s budget be funded from uniform concessions from member countries and a new levy — tentatively 1 per cent — targeting imports and exports.
This would, apart from hurting consumers, make EAC commodities less competitive in external markets. The prices of commodities such as fuel, food, cars, machinery and second-hand clothes — the most common goods sourced from outside EAC — and those exported outside the region including agricultural goods, are likely to go up.
Consumers may be forced to pay more for goods imported from outside East Africa as the EAC Secretariat targets an international trade levy to reduce its dependence on donor funding.
The Heads of State Summit held last week resolved that the Secretariat’s budget be funded from uniform concessions from member countries and a new levy — tentatively 1 per cent — targeting imports and exports.
This would, apart from hurting consumers, make EAC commodities less competitive in external markets. The prices of commodities such as fuel, food, cars, machinery and second-hand clothes — the most common goods sourced from outside EAC — and those exported outside the region including agricultural goods, are likely to go up.
Among the proposals that were dropped in favour of the levy was one where a member state would have been required to commit a proportion of its GDP to fund Community programmes because it would have given bigger economies more clout in the bloc’s affairs.
EAC relies on donors for up to 70 per cent of its budget which was $110.6 million in 2015.
A community levy is the main source of resources for the EU and Economic Community of the West African States (Ecowas) but the private sector is already anxious about its impact on the cost of doing business.
“The partner states all have different import declaration fees there should be a mechanism for either unifying it at a lower rate or removing them completely to avoid increasing the cost of doing business,” said Vimal Shah, chairman of the Kenya Private Sector Alliance.
According to Scolastica Odhiambo, an economics lecturer at Maseno University, the burden of the imposed levy will automatically be transferred to consumers, since the cost of the goods will go up.
“The levy should be on specific goods,” she said. “For imports, the countries already have a railway levy, import duty and VAT on the goods so unless the governments target luxurious goods like cars, it will be too expensive to import goods into the region.”
Kenya, for example, charges an import declaration fee of 2.25 per of the value of the goods imported, Tanzania charge 1.2 per cent while Uganda charges 0.08 per cent.
The EAC-wide import duty on food supplements is set at 10 per cent, that of manufactured goods is at 18 per cent, while machinery and transport equipment attract a tax of 35 per cent. Fuels and lubricants are levied at 7.5 per cent.
“The challenge will be how to obtain the total amount collected by a country as import/ export levy because some countries export/ import more than the other,” said Dr Odhiambo.
Unless there is a clear mechanism on how to do this, she said, most countries will not declare their full import value.
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