EAC settles on 32pc tax to lock out cheap imports


East Africa Business Council chief executive Peter Mathuki during a past briefing in Nairobi. PHOTO | DIANA NGILA

Negotiators have agreed to raise the East Africa Community’s (EAC) upper tariff band to 32 percent, breaking a deadlock that has delayed review of the customs taxes for close to 10 years.

At the moment, the region’s three-band common external tariff (CET) structure has an upper rate of 25 percent, which is blamed by the private sector for letting in cheaper goods from outside the bloc.

The region currently charges zero percent on raw materials and capital goods, 10 percent on inputs and 25 percent on finished goods imports. In addition, there are a number of products such as maize, rice and textile which the EAC has put under the sensitive list to attract CET at rates between 35 and 100 percent because they can be produced within.

The agreement implies that tariffs will be reviewed to charge import duty of 32 percent on all finished goods from non-EAC states. “We mediated and arrived at an upper band of 32 percent, a figure we thought would be favourable to everyone,” said Mr Peter Mathuki, CEO of the East African Business Council (EABC).

Through the years of negotiation, Kenya and Uganda have been pushing for a higher upper CET band of 35 percent “to protect the local industries from influx of cheap goods” while Rwanda has been keen on an upper limit of 30 percent.

The new band will have to be ratified by the council of ministers before being presented to the Heads of States Summit later this month.

Throughout the CET review negotiations, the EABC has been teaming up with national lobby groups East (AIB, KAM, CTI, RAM and UMA) to push for replacement of the three-band tariff structure with a four-tariff one “to address various degrees of processing and encourage backward and forward value addition”.

The private sector has also been pushing for introduction of specific as opposed to the ad valorem (percentage) duty rate on products prone to undervaluation, subsidy, dumping and world price fluctuations.

Also on cards have been amendment of EAC Customs Management Act to remove blanket exemptions of CET for state projects “to encourage local sourcing”.

The private sector has also been pushing for establishment of an independent regional agency to scrutinise and approve any requests for exemption and duty remission.