A regional private sector lobby wants countries stopped from deferring implementation of a common tax that took effect July 2022.
The lobby, East African Business Council (EABC) has identified the deferment as a major setback to implementation of the regional tax which denies businesses growth opportunities.
The tax, Common External Tariff (CET), is being levied among East African Community Partner States and is contained in the EAC Common External Tariff 2022 Version.
This version saw the introduction of a fourth category of products that attract a tariff of 35 per cent.
The deferment of this tax is being done via Stay of Applications (SOA) by member states.
In a survey published by EABC, businesses operating in this market, while calling for abolishment of the applications, also want EAC Partner States to use the region's Duty Remission Scheme and not their market-specific rates.
A DRS is the system where refunds are made on imported inputs used to manufacture goods destined for other markets. Instead of member states using the approved DRS for the region, they revert to country specific.
According to the survey by the East African Business Council (EABC), a lobby for private sector in the region, even so details that majority of businesses, 67.7 per cent, perceive the tariff to be of benefit to the region.
This is while 14.3 per cent disagree and 17.9 per cent of businesses are not sure if their enterprises are benefiting.
The EAC Common External Tariff 2022 came into effect in July 2022. This tariff introduced a fourth band that imposed a 35 per cent import duty on products which can adequately be sourced from the region.
urvey report
While this band sought to have the markets raise the much required tax revenue, it also aimed to protect businesses in the region.
The survey by EABC published October 2, sought to gather feedback from business on implementation of the tariff.
The survey is titled EABC survey report on implementation of EAC Common External Tariff(CET) version 2022.
Some of the challenges noted in the survey include misclassification of some tariff lines(products), errors, misalignment of tariff lines and some products which still needed to be moved from other bands to the maximum tariff of 35 per cent.
The survey notes that one of the reported main challenges regarding the implementation of the EAC CET 2022 Version, is the failure of the EAC Partner States to uniformly implement the new Common External Tariff as was the case for the previous one.
"The EAC Partner States have continued to persistently apply for Stays of Applications (SOAs) and Country Specific Duty Remission creating an unleveled playing field for producers, manufacturers and traders across the region," the survey reads.
It adds that this action has in addition frustrated intra EAC trade and investment as well as regional value addition which were among the objectives of developing the EAC CET 2022 Version. This negates the efforts spent over five years that culminated to the four band tariff.
The survey collected views from several sectors namely: building material, food processing, services and consultation, energy, paper and paper products, metal and metal products, general trading and graphic design.
Benefits of tariff
Some of the benefits of the tariff the businesses highlighted include expansion of intra-EAC trade and investments through increased import and exports, increased production volumes and local consumption, promotion of value addition for local goods, creation of employment, and less substandard products from markets like China for products like steel.
A section of the businesses, 14.8 per cent, perceived that there is a reduction in the use of Stay of Applications to support development of national and regional value chains.
The two major challenges, according to the survey findings, represented by 21.4 per cent each, are misclassification of products in the CET bands, particularly processing of intermediate inputs, resulting in frequent Stays of Applications and, limited industrialisation to generate adequate supply of products to be traded in the regional Customs Union and Common Market.
The other challenges are: unleveled plating field due to the uneven application of CET and market access limitations for products benefiting from country specific Duty Remission Scheme(DRS) in relief on imported inputs for production.
DRS entails refunds on of duties paid on imported inputs when used for the manufacture of goods for export out of EAC.
"The above-mentioned challenges compromise progress towards achieving intended objectives of new EAC CET 2022 Version," the survey says.
