Economy

EA firms want low inputs taxes to stay

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Firms want EAC members to extend duty remission on key inputs from outside the bloc. FILE PHOTO | NMG

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Summary

  • The industry captains want Kenya, Tanzania, Uganda and Rwanda to extend duty remission on key inputs from outside the bloc.
  • They are also calling for imposing higher taxes on finished products that raise competition to local goods.
  • Under the current three-band CET structure, the bloc charges zero per cent on raw materials and capital goods, 10 per cent for inputs and 25 per cent on finished goods imports.

Industrialists in East Africa are lobbying for retention of low inputs taxes after the bloc failed to finalise review of its common external tariff (CET) structure ahead of the Thursday Budget Day.

The industry captains want Kenya, Tanzania, Uganda and Rwanda to extend duty remission on key inputs from outside the bloc while imposing higher taxes on finished products that raise competition to local goods.

Under the current three-band CET structure, the bloc charges zero per cent on raw materials and capital goods, 10 per cent for inputs and 25 per cent on finished goods imports.

Products deemed sensitive however attract import duty of between 35 and 100 per cent.

The four-band CET structure that the business community has been pushing for seeks duty on raw materials at zero per cent and 10 per cent for intermediate goods not produced in the region. It also proposes 25 per cent for intermediate goods produced within the region and up to 35 per cent for finished goods.

Through their lobby, the East African Business Council (EABC), the firms want ministers to extend remission schemes to boost post-corona recovery after failing to agree on the four-band CET structure.

“Given the fact that EAC Partner States have not finalised the comprehensive review of CET…Duty remission will enable manufacturers to import inputs that are not available in the region at a competitive price,” EABC chief executive Peter Mathuki said in a statement. “Some of these inputs will be used in the manufacture of Personal Protective Equipment (PPEs) used in the fight against Covid-19."

Duty remission schemes, which are usually reviewed every year in meetings of EAC Finance ministers ahead of budget statements, are largely aimed at lowering cost of production for factories and raising the competitiveness of EAC products in global markets.

Treasury secretary Ukur Yatani will on Thursday deliver his maiden budget statement to the National Assembly on the same day as his EAC counterparts in Tanzania, Uganda and Rwanda in line with tradition.

Some of the imports it wants protected in the absence of a four-band CET are Completely Knocked Down kits for motor vehicles and motorcycles that have enjoyed duty remission since 2013 on condition that they source materials and manufacture frames, seats, wheel rims, mudguard and exhaust pipes within EAC bloc.