An Immigration point at Namanga border. Kenya has given itself a deadline of a year to cede its custom collections to a regional institution. Photo/File
The search for a semi-autonomous customs body for East Africa is set to go past the deadline following delays in negotiations.
Officials said low trade volumes, conflicting laws and diverse domestic taxes are among the hurdles.
“These challenges which are detailed in the report prepared by our consultants must be addressed to seal all gaps that have prevented the region from becoming a single customs territory,” said Mr Abdul Bonaya, KRA’s assistant commissioner for customs.
Each of the five East African countries relies on departments of national revenue agencies to assess and to collect customs services.
Customs accounts for 36 per cent of KRA’s annual collections. The arrangement is blamed for slow clearance and movement of goods across borders.
With a single custom currency in place, the five states — Kenya, Tanzania, Uganda, Rwanda and Burundi — are expected to cede all customs collection activities to a semi-autonomous body and eliminate internal border points.
The common revenue agency to be based at common entry and exit points of these countries is also expected to come up with a formula for sharing revenues.
Under pressure to lead from the front, Kenya has set itself a period of one year to cede its custom collection to the regional body.
Finance Minister Njeru Githae said in his budget speech that the country was realigning operations of our Customs with this EAC Common Market Protocol, adding that KRA would allow its Customs Services to acquire an entity on its own.
At implementation level, technical-level officers have warned that low intra-regional trade of about 15 per cent is not sustainable.
They have also cited different rates and bases for charging domestic taxes such as VAT and excise duty —which are also collected at internal border points — factors that will complicate work.
“We’ve neither been able to agree on the best model for customs collection nor the common rules of origin for the shared custom territory,” Mr Bonaya said at a media briefing in Nairobi on Wednesday.
A single customs territory is seen as the first critical step in the implementation of the common market protocol launched in July 2010.
The delay by Parliament to harmonise 27 pieces of legislation with the provisions of the common market protocol has complicated work for technical teams.
The private sector appears to be reading from the same script.
“The roles that institutions such as KRA play are recognised in the Constitution, meaning ceding part of it to a semi-autonomous regional body will take a long and protracted legal process,” said Mr Ibrahim Kitoo, an officer in charge of regulatory affairs at the Kenya Association of Manufacturers.
Firms in the financial sector operating across the border are reporting gains.
Last year, 7.1 per cent of the after tax profit of Sh10.4 billion that Equity Bank reported was from its subsidiaries while KCB obtained 10.4 per cent of its Sh10.9 billion after tax profit from regional branches and DTB got 15.4 per cent of Sh2.6 billion profit from the region.
