Why EAC is yet to review taxes on ‘sensitive goods’

NAIROBI – The EAC Council of Ministers had given member states three additional months to agree on the implementation of a new CET after failing to meet the July 1, 2017 deadline. The revised deadline expired on September 30.

EAC parties argue that the current CET has failed to promote regional trade and industrialisation.

People privy to the discussions said members have not submitted their national positions on the CET and that it may eventually require political will from on high to reach a deal on the tax treatment of sensitive goods such as milk, rice, wheat and sugar.

They say the CET review process could be taken back to the Council of Ministers and later to a heads of state summit to address the sluggish pace by the member countries.

“We are behind schedule because we have not reached the level of negotiating as a region. The partner states are yet to come up with negotiating positions. Each country has to come up with a position to negotiate with each other. A lot of consultation has to take place and at times it might even take a political agreement to change the CET,” a source said.

The EAC Secretariat has written to the members, raising concerns on the sluggish pace.

Internal differences

In Kenya, internal differences have slowed down the pace of preparing a national CET review document spelling out its position.

Kenya’s Trade Principal Secretary Chris Kiptoo said Kenya’s position is still work in progress. “We do not have a document in place yet. We are trying to prepare our position. We cannot go to negotiate our position in the region when we are divided internally,” Dr Kiptoo said.

A source said there are differences playing out within the Kenya Association of Manufacturers (KAM) because of various interests. There are those who want to import things at low rate vis-à-vis those who want their industries to be protected.

“When KAM presents its proposals, then the government will make a decision on what’s the best interest of the country,” the source added.

The extended deadline for the implementation of the CET is expected to be set by the EAC Council of ministers after the member states state reasons why they could not meet the earlier timelines.

In September last year, the EAC Council of Ministers said that the stability of the CET has been affected by the frequent stays of applications by partner states, thereby distorting and eroding harmonisation of the tariff regime.

The current CET was designed and negotiated in 2002 to 2004 before coming into effect on January 1, 2005.

According to the USAID East Africa Trade and Investment Hub, although the ‘stays of application’ are legal, they put the region’s CETs at risk.

It is still not yet clear the position taken by other EAC member states but last year, Kenya hinted that it requires the tariff bands of the current CET be increased from three to four to take care of industries that import industrial inputs.

Other considerations include dropping some items from the list of sensitive goods and opening them up for competition from imports outside the EAC.

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