EALA calls for harmonized EAC tax regimes as 'differences hurt integration'

Diverse tax regimes within East African Community (EAC) member countries, including variations in value-added tax (VAT) and excise duties, have been identified as detrimental to businesses and potential deterrents to regional investors, the East African Legislative Assembly (EALA) said on March 13. During its plenary sitting in Nairobi, the Assembly addressed this issue by adopting a motion urging the Council of EAC Ministers and partner states to expedite the harmonization of tax policies. This initiative aims to eliminate tax distortions and foster investment across the community. The motion, moved by MP George Stephen Odongo of EALA from Uganda, underscores the necessity of preventing tax discrepancies that impede the free flow of goods, services, and capital while advocating against unfair competition among member states. The Assembly voiced concerns over unaligned excise duties and discriminatory taxes, which not only disrupt cross-border transactions and investment decisions but also contribute to trade disputes and undesirable practices like smuggling to evade taxes. Additionally, unharmonized tax policies disproportionately affect cross-border trade, especially for vulnerable women traders who encounter multiple taxes and fees across partner states. In response, the Assembly urged the Council of Ministers and Partner States to develop, adopt, and implement programs for harmonizing tax policies. This includes establishing clear definitions, rates, assessment criteria, and other parameters for various taxes to ensure consistency across member states. Odongo emphasized that the existing tax disparities incentivize a race to the bottom among partner states, hindering market integration and trade. MP Fatuma Ndangiza echoed these sentiments, highlighting the obstacle unharmonized tax regimes pose to regional trade and integration. She emphasized the urgency of addressing this issue to enhance the EAC's competitiveness and attractiveness as an investment destination, especially in light of the African Continental Free Trade Area. Meanwhile, the Assembly commended EAC partner states for their efforts in adopting and implementing a unified customs law and Common External Tariff, acknowledging these steps as positive strides towards regional integration.

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EALA calls for harmonized EAC tax regimes as 'differences hurt integration'