MATRIX OF ISSUES
Challenge: The process to review the EAC CET has taken a long time as Partner States failed to agree on the maximum rate of either 30% or 35%. Tanzania and Uganda support 35% while Burundi, and Rwanda are pushing for 30%. Kenya is still undertaking national consultations.
Members Affected: Manufacturers, Importers and Agricultural sector.
EABC Secretariat organized a regional consultative meeting on EAC CET in Nairobi on the 22nd August 2019 to develop a private sector position. The Meeting came up with the following: • Private Sector stakeholders from EAC region unanimously proposed a shift from a 3-band tariff structure to a 4-band tariff structure of 0%, 10% 25% and a rate above 25% as maximum rate;
On the Maximum CET Rate above 25%, Private Sector stakeholders from Uganda, Tanzania, and Kenya proposed a Maximum CET Rate of 35% while Burundi, Rwanda and South Sudan proposed 30% as Maximum CET Rate.
The EAC SCTIFI held its 36th Extra Ordinary Meeting on 9 th -13 Sept 2019 to discuss among other things, CET Review and Persistent NTBs.
EABC was invited to a make presentation on EAC-CET Structure on Permanent/Principal Secretaries Retreat Session on 10th September 2019.
The key outcomes of the ExSCTIFI were: in line with EABC the private Sector Consultative Meeting, the Permanent/Principal Secretaries of SCTIFI adopted the four-band structure of 0%, 10%, 25% and above 25% as maximum rate.
On the rate above 25% as Maximum rate agreed, the Regional Task Force will determine products that will fall under upper limit as well as those that fall under the maximum rate of 30% or 35%.
From 28th Jan to 1 st February 2020, the Regional Task Force (RTF) met in Zanzibar and failed to agree on the Maximum rate being either 30% or 35%.
EABC has submitted a proposal of 32.50% as a maximum to EAC Partner States for consultations.
Challenge: Beverage and Flavour Compounds (Mango, Baobab, Orange & Tamarind) produced by Afribon (K) denied Preferential tariff treatment by Tanzania
Members Affected: AFRIBON (K) Ltd from Kenya
Status Update: EABC has written to EAC Secretariat requesting Tanzania to accord preferential tariff treatment or initiate a verification mission in Kenya to establish whether the products meet the EAC Rules of Origin criteria.
Challenge: Tanzania misclassification of tariff code of Crude Palm Oil imported by Bidco Africa Limited and hence TRA seized 400MT.
Members Affected: Tanzania
Status Update: EABC wrote a letter to TRA on this matter; EABC initiated a meeting between BIDCO and TRA Commissioner General; TBS wrote a letter to TRA confirming that the consignment was Crude Palm Oil and hence urged TRA to facilitate release of the consignment This issue has not yet resolved
Challenge: Burundi and Tanzania are yet to ratify EAC Agreement for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income. Unharmonized Domestic Tax Regimes (VAT, Excise and Income Taxes).
Members Affected: All Members
Status Update: The Agreement is yet to come into force as Burundi and Tanzania are yet to ratify. EABC Secretariat with support from TMEA will be organizing public private dialogue meetings with the Governments of Burundi and Tanzania to ratify the DTA.
Challenge: Unliberalized EAC Air Transport Services (Domestication of the EAC Air Space).
Members Affected: All Members
Status Update: EABC conducted a study on Costs and Benefits of Open Skies in EAC which supported the liberalization of air transport services. EAC Partner States are delaying the finalization of EAC Regulations on Liberalization of Air Transport services. EABC to organize a regional PPD workshop on liberalization of air transport services.
Challenge: Currently, EAC Partner States have come up with various Special Economic Zones (SEZs) as areas of investment for export purposes unlike Free Ports, other SEZs are not covered in the EAC Customs Union Protocol.
Members Affected: Manufacturing
Status Update: The EABC Consultative Meeting that was held on 30th -31st Oct. 2019 to Harmonize Policy Proposals on Customs and Domestic Taxes Proposed; Provisions to direct the operations of emerging Special Economic Zones (SEZs) in the regional laws.
Challenge: Existence of numerous Security bonds in the region is considered as an addition to high cost of doing business in the region as well as infringing on working capital of businesses/Economic operators.
Members Affected: Transport and Logistics
Status Update: EABC Consultative Meeting which was held on 30th -31st Oct. 2019 to harmonize Policy Proposals on Customs and Domestic Taxes Proposed; in addition to EAC initiative to establish EAC Customs Bond which will cover transit and/or warehousing, there is need to consolidate all security bonds in the region and come up with one bond and consider modalities for regionalizing it.
Challenge: EABC Baseline Survey on Customs & Domestic Taxes demonstrated that on domestic taxes; EAC Partner States impose discriminatory internal taxes (domestic taxes), levies and other charges on goods transfer to their country. There is near convergence on corporate tax rate and Value Added Taxes (VAT) rate but wider disparities on Excise Taxes and taxes on income
Members Affected: Manufacturers & Service sector
Status Update: EABC held a consultative Meeting on 30th – 31st Oct. 2019 to harmonize Policy Proposals on Customs and Domestic Taxes. The proposals were submitted to EAC Secretariat.
Challenge: Introduction of electronic/digital tax on excisable goods in the region is increasing the cost of production, burdening the manufacturers & consumers, encouraging capital flight and inefficiency as it is monopolized by one company.
Members Affected: Manufacturers and Consumers of Excisable Goods from Kenya, Tanzania and Uganda
Status Update: The cost of electronic/digital tax stamp should be covered by excise tax paid and services open to competitive bidding to discourage monopoly by one company across the region.
Challenge: Kenya authorities have denied access of milk products (Lato) from Pearl Dairy Farm Limited (Uganda) into Kenya market. This has been done by denial on issuance of import permit, impounding milk products (Lato) from warehouses and trucks, claiming that the products are substandard, counterfeit, smuggled into Kenya and not meeting EAC Rules of Origin criteria
Members Affected: Peal Dairy Farm Limited, Milk Farmers in Uganda and Milk Consumers in Kenya
Status Update: EABC has written to EAC Secretariat requesting for a regional intervention given that the issue has taken so long to be resolved through Bilateral (Uganda & Kenya) intervention.
Challenge: Some EAC Partner States have been according preferential tariff treatment to Mild Steel Plates which are manufactured by Raw materials classified under (HS 7208.10.00-7208.40.00). Mild Steel Plates manufactured from such raw materials cannot qualify for preferential tariff treatment. This is creating unlevel play field among manufacturers of Mild Steel Plates in EAC Region.
Members Affected: Steel & Tube Industries Ltd and Manufacturers of Mild Steel Plates from Uganda
Status Update: EABC wrote to the EAC Secretariat seeking clarifications on this Matter. EAC has given a clarification and requested submission of evidence on countries which are according preferential tariff treatment to Mild Steel Plates that are using the raw materials which do not qualify for EAC originating.
Challenge: Whereas Ugandan and Kenyan registered number plates are being charged $55 per bus per day, Trinity bus company is required to pay $152 per bus per day.
Members Affected: Trinity Transporters and Distributors Limited, Rwanda
Status Update: EABC wrote to the EAC Secretariat seeking guidance on this Matter with a view of being addressed. This being an NTB that was reported recently in March EABC is following up with the EAC Secretariat.
Challenge: RFDA issued a notice requiring all importers and exporters to register and license their products.
Members Affected: Kenya Association of Manufacturers and all members dealing in food and drug products.
Status Update: EABC wrote to the EAC Secretariat seeking guidance on this Matter with a view of being addressed. This being an NTB that was reported recently in March EABC is following up with the EAC Secretariat