Barely two months after joining the East African Customs Union, Rwanda is reaping from increased volume of trade across its borders, according to the Ministry of Commerce and Rwanda Revenue Authority (RRA).
This was revealed during a one day seminar organised by the Institute of Policy Analysis and Research (IPAR) under the theme, “implications of the East African customs union protocol on Rwanda’s economy.”
According to Atoine Ruvebana, the Permanent Secretary in MINICOM, Rwanda is benefiting through easy access to a wider regional market.
“The East African region has got 120 million consumers which means that it is a bigger market for our products,” said Ruvebana.
He said, the increased volume of trade will lead to reduction of prices while traders will make more profit to enable them honour their tax obligations.
Rwanda officially began the implementation of the East African Community’s Customs Union on July 1st this year, two years after her entry into the regional bloc.
Rwanda has projected a revenue loss of Rwf12.2 billion as it joins the Customs Union but the Ministry of Finance and Economic planning says the loss will be compensated by the COMESA compensation fund.
To facilitate trade in the region, the East African Community has liberalised trade and taxes to allow free flow of goods and services from one nation to another.
“Rwanda’s trade liberalisation efforts started after 1994 Genocide (against Tutsi) with the review of tariff structure, rationalisation of tariff bands, removal of import restrictions and the liberalisation of current and capital accounts,” said Eugene Torero Deputy Commissioner General of RRA.
Torero identified the major changes the tax body has made to facilitate trade including the adoption of EAC common external tariff with a three band structure that attracts 25 percent on finished goods from outside the community, 10 percent, semi finished and 0 percent on raw materials.
“We have also removed freight charges in calculation of duties and taxes on imports by air,” Torero said.
Statistics show that Rwanda customs revenue collection as the main revenue earner has significantly reduced from 52 percent in 2001 to 37.5 percent in 2008, largely due to implementation of regional trade agreements.
However, the tax authority says that implementation of the customs union still faces numerous challenges including lack of uniformity in application of customs law by EAC partner states.
They also include application of EAC simplified certificate of origin, not to exceed goods worth $500 but some partner states are slow in implementing it.
Price reduction accruing from trade liberalisation also still remains a challenge.