Importers of wine, shoes and tiles to pay more as new EAC directive comes into force

Importers of products such as construction materials, furniture, wine, beauty and makeup products to the East African Community are set to pay more taxes as new EAC directive comes into force. Effective July 1, a 35% tax rate will be charged on products that are imported from outside the East African Community yet they are manufactured within the community. In a communique issued by Rwanda Revenue Authority last week, the new tax rate will affect commodities such as construction materials including tiles, steel bars and barbed wires. Other products to be taxed include mattresses, packaging, soap, beverages, toilet paper, footwear, vegetables, fruits, coffee, tea, dairy and meat products. The new tax rate is for the fourth band of the EAC’s Common External Tariff (CET). Common External Tariff is a uniform tariff rate adopted by a customs union or common market, such as the East African Community, to imports from countries outside the community. According to the Director of Rwanda Association of Manufacturing, Alphonse Kwizera, the products under this band are readily available in the region and therefore will attract more tax to import. In a communique issued by Rwanda Revenue Authority last week, the new tax rate will affect commodities such as construction materials including tiles, steel bars and barbed wires. Other products on the list include furniture, mattresses, packaging, beauty and make up products, soap, toilet paper, footwear, vegetables, fruits, coffee, tea, beverages, wine, dairy and meat products. According to the Director of Rwanda Association of Manufacturing, Alphonse Kwizera, the products under this band are readily available in the region and therefore will attract more tax to import. “The maximum tariff band at 35 percent was considered as the most appropriate rate as it has the most positive impact on regional growth long term,” said Kwizera. He added that, “The intention is to increase value addition and promote local manufacturing industry. This is likely to steer the manufacturing sector into an upward spiral, attract more investments and employment in the region.” Meanwhile, a recent report by Deloitte, an audit firm, showed that while the new rate will promote industrialisation in the region, it is likely to negatively impact the purchasing power of citizens. “An increase of 10 per cent points to 35 per cent is too high and will have a significant impact on prices of finished goods, considering other domestic taxes which would affect the purchasing power of citizens,” the firm said in its report. Deloitte noted that the challenges posed by the new tariff is expected to be compensated by the more incomes earned by the citizens from the additional employment opportunities created through the expected growth in the local industries. However, Kwizera is confident that the purchasing power will not be affected. When asked, he said, “Not really. It is only a limited number of products with a positive impact on industrial growth.” The effective implementation of CET is expected to secure the progressive growth and competitiveness of the manufacturing sector. It will result in better productivity, creation of job opportunities, increased revenue and regional prosperity. The Chairman of Rwanda Freight Forwarders Association (RWAFFA), David Rwigema Mugema, said that CET is not going to affect importers as they will go on with their businesses but factor in the new tariff before determining the final product. “This new tariff affects only goods coming from outside the East African Community. In this case, we can call it protectionism, the local producers can enjoy selling their goods at ease on the market, while the external producers will be charged highly which will affect the prices on the market and this gives a competitive advantage to the local product,” Mugema said. He added that, as the new tariff builds capacity for the local manufacturers, the consumers of external products who are determined to have them will still go for it irrespective of how expensive it is.

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Importers of wine, shoes and tiles to pay more as new EAC directive comes into force