The 1st of July marked the formal implementation of the EAC Common Market Protocol (CMP). Expectations were and still high as the business community expect to witness a new beginning of the free movement of goods, labour capital and services across the region. So far, however, little is registered since the signing of the Protocol.
All member governments have acknowledged that implementation is going to be progressive – but up to now there appears not to be a plan to guide this “progressive” implementation.
Member countries are supposed to put in place legislation to facilitate domestic provisions of the CMP by 21 August but there is no indication so far that anything is happening.
They are also supposed to conclude a review of national laws and align them with the CMP by 31 December. So far, only Kenya has put in place a team of civil servants who have also submitted their report on which national laws need to be reformed to comply with the Protocol.
Kenya has highlighted immigration, citizenship, nationality, registration of businesses, bankruptcy and insolvency, social security and labour laws.
Indeed member countries by all angles look to be behind the schedule. Being behind the schedule is not that important but fear comes only when this delay is caused most probably by underneath resistance to change.
Member countries have not agree on a system of revenue collection and sharing – have postponed negotiations to that effect; this inaction is likely to undermine implementation. And, it seems, the EAC Secretariat has no alternative plan to address this issue.
There is continued absence of schedule to harmonize domestic tax policies as much as to an extent on common external tariffs. Countries still levy different tariffs on goods imported from outside the EAC, despite the agreement on common position to adopt a common external tariff.
Domestic taxes, like VAT, excise taxes and withholding levies are all still levied at different rates and, in some other instances, taxpayers are obliged to pay different taxes on one product across the region including paying taxes in more than one country. As yet, it seems, there are no plans to do away with double taxation.
Clearly tax policies are a delicate issue because they affect governments’ revenue. And governments are unwilling to forego any source of tax income until they can see the alternative.
While this from government point of view is understandable failure to address the issue raises concerns from private sector. Traders and investors alike look forward to a rather harmonized policy – if EAC is to position itself as a regional investment destination. This is going to be a real litmus test of political commitment.
East African Business Council (EABC) is working hard to address these issues and to persuade governments that improved and harmonized tax policies will stimulate investment rather than reduce government revenues.
Improved investments and trade will consequently lead to growth in jobs and tax revenues, so everyone will win.
The writer is a Research and policy Adviser at the East African Business Council