Tax disputes, trade wars headache for new EABC board
Sunday July 03 2022
The East African Business Council (EABC), which last week elected a new executive committee, says it will expedite the formation of a trade remedy committee to deal with disputes and cut disruptions in the East African Community (EAC) Common Market.
The team, elected on the sidelines of the Commonwealth Heads of Government Meeting in Kigali, comes at a crucial time when the EAC partners are squabbling over trade rules, and Rwanda and the Democratic Republic of Congo have all but closed borders to trade over security concerns in the face of violence blamed on the resurgence of the M23 rebel group.
The new team for the private sector lobby, led by Tanzanian Angelina Ngalula, is expected to decisively deal with tariff and non-tariff barriers (NTBs) that hinder regional trade.
The executive committee was scheduled to meet Ugandan President Yoweri Museveni on June 30, amid threats by Kampala to withdraw duty remission in retaliation to a trade war with Kenya involving agricultural products, and blamed on Nairobi’s persistent introduction of tax measures on Uganda’s exports.
Read: Looming trade war over Kenya tax on Uganda eggs
“We are having so many challenges in accessing markets for Ugandan goods in Kenya.
‘‘In fact, Uganda is trying to pull out of the duty remission scheme but we are working on keeping them there,” said Simon Kaheru, chairperson of the EABC Ugandan Chapter, who was retained as the vice-chair to the council.
“Uganda has surplus industrial sugar but there’s nowhere to sell it. The same with milk and other commodities,” he added.
If Ugandan manufacturers pull out of the duty remission scheme, this would have far-reaching consequences on intra-EAC trade as no country would have mandate to collect import revenues.
“Some of our products, despite high value and low pricing, do not have access to the regional market. Some of our neighbours are contravening our Customs Union and Common Market principles,” complained Tony Gadhoke, CEO of Mukwano Industries, when EABC chief executive John Bosco Kalisa visited the company in Kampala on June 29.
“We call for the elimination of NTBs stay of applications, revision of EAC rules of origin on edible oil, and the electronic gazettement of a region-wide duty remission scheme,” Mr Gadhoke said.
Mr Kalisa, who also met with Ugandan manufacturers, raised concerns over the manner in which the trade disputes between Kenya and Uganda were being handled.
“We are currently in Uganda and there are complaints that the Kenyan authorities are always imposing tax measures on Ugandan imports without any major consultations,” he said.
Kenya has imposed new tax on poultry, eggs, milk, sugar and other Ugandan products in contravention of EAC regulations.
“Ugandan fresh produce should access the Kenyan market without any constraints.
‘‘But they impose tax measures without consulting them, and that is not good for bilateral trade or even internal trade,” said Mr Kalisa.
Read: Private sector calls for tax uniformity across EAC
The stake of President Uhuru Kenyatta’s family in the dairy sector in Kenya is viewed as one of the major factors causing the trade dispute that has lasted three years.
But no evidence has been adduced to the president’s interference in the trade.
Kenya is now taxing Ugandan eggs at a rate of Ksh72 ($0.6) per tray, bringing back a levy that had been suspended last December following bilateral talks.
The move has angered Ugandan traders and Kenyan consumers as the price of eggs in Kenya has gone up, courtesy of the imposed 25 percent excise duty.
A tray of eggs in Kenya now costs Ksh450 ($3.82) up from Ksh360 ($3.05) two weeks ago as traders cite shortage.
In retaliation to Kenya’s fresh tax measures, Uganda has also declined to admit Kenyan juice into its market.
Since November 2017, Kenya complained that Del Monte pineapple juice, for instance, is still charged a 13 percent excise duty in Uganda.
Read: Unharmonised taxes blamed for unfair trade in EA
Pineapple juice row
Uganda argued it is difficult to differentiate between pineapple juice manufactured using local concentrate versus juice manufactured using concentrate imported under duty remission for exports.
Under the EAC, duty is exempted if the core ingredients are locally produced.
Uganda argued it could not accord preferential treatment to Del Monte pineapple juice and requested for amendment on this NTB since Kenya also charges excise duty on Ugandan juices.
On June 14, the EAC Secretariat reported that Uganda wanted the issue forwarded to the Sectoral Council on Trade and Finance for resolution.
Uganda has also imposed excise duty on Kenyan manufactured goods, including pharmaceutical products.
As the Kenya-Uganda trade war threatens to escalate, another is simmering between Rwanda and Tanzania.
Also read: Tanzania reaps spoils of Uganda’s trade fights
Rwanda has since 2018 complained that milk exported to Tanzania attracts numerous charges collected by different institutions such as the Tanzania Bureau of Standards, Tanzania Foods and Drugs Authority and the Tanzania Dairy Board.
To import a kilogramme of milk into Tanzania, the government now requires Tsh2,000 ($0.86) from Tsh150 ($0.064).
This is a 1,233 percent increase, under the Animal Diseases and Animal Products Movement Control Regulations published on August 31, 2018 (Government Notice No 476) and which entered into force on October 1, 2018.
Rwanda says this is commensurate to a total ban since imported milk cannot compete with the local one.
The dispute is yet to be resolved.
All eyes will be on the EABC especially because a key player in these disputes sits on the executive committee.
Tanzania trade war
A trade dispute is also bubbling between Uganda and Tanzania. Uganda does not recognise the calibration certificate issued by the Weight and Measures Agent (WMA) for oil tanks from Tanzania. As a result, Tanzanian traders are forced to undergo recalibration by the Uganda Bureau of Standards at a cost of $230. This increases the cost of doing business.
There are also disputes between Tanzania and the rest of the EAC partner states over work permits.
Dodoma demands a business visa fee of $250 for EAC business persons entering Tanzania, charged as Certificate of Temporary Assignment at all borders, contrary to the EAC Common Market Protocol of free movement of people across the region.
The fee is charged on persons visiting Tanzania on temporary assignments (economic activities and professional services) such as consultancy.
Tanzania has been urged to scrap the fee for East African citizens as per Regulation 5 of the EAC Common Market Protocol.