Harmonized EAC tax regime the way to go, says President Kikwete / Region needs to address fears to ensure win-win situation for all
ARUSHA, Tanzania, November 11, 2011/African Press Organization (APO)/ — The President of the United Republic of Tanzania H.E. Jakaya Kikwete has urged EAC Partner States to harmonize their tax regimes to ensure the smooth operation of the EAC Customs Union and Common Market.
The Tanzanian President made the remarks today when delivering the keynote address at the Regional Public Private Dialogue on Harmonization of Domestic Taxes in the EAC, which was held at the Bank of Tanzania headquarters in Dar es Salaam and was jointly organized by the East African Business Council (EABC), TradeMark East Africa and the IFC-World Bank Group in collaboration with the EAC Secretariat.
“In our pursuit of the EAC integration agenda we are cognizant of the need to harmonise our tax policies and tax regimes.
“This way we will be able to eliminate tax distortions, which is critical for the smooth functioning of the Customs Union, Common Market, Monetary Union and the whole of the integration process,” President Kikwete asserted.
Observing that there were fears that still prevail in as far as this matter is concerned, the Tanzanian President urged the region to address these to ensure a win-win situation for all.
“We should find a way of accommodating the fears and differences we have towards tax harmonization so that everybody wins,” the President said.
He added: “I know there are considerable differences in our countries but I am of the view that these are matters that our countries have ample experience and capacity to deal with. The successes that we have achieved in the harmonization of Customs tariffs in five years under the Customs Union should serve as a good lesson to us in harmonizing domestic taxes”.
President Kikwete lauded the progress made by the EAC Customs Union, which he said had “indeed delivered on the promise of promoting trade” in the region, noting that over the last six years of the Customs Union’s existence there has been a tremendous expansion of trade in East Africa, which has grown from US$1.85 billion in 2005 to US$ 3.5 billion in 2009.
He also hailed the EABC and the business community for embracing the Customs Union and the Common Market and for making good use of them, while encouraging them to “aspire to do more for we are barely scratching the surface to the available opportunities for trade in East Africa”.
The EAC Secretary General Amb. Richard Sezibera meanwhile asserted that a harmonized tax policy would benefit the regional integration process by providing a conducive environment for tax administration and encouraging tax compliance.
“There is a direct relation between prudent tax administration and the maximization of the benefits of regional integration in terms of stimulation of productivity, growth of revenue and raising the living standards of the people,” the Secretary General affirmed.
Citing the EAC’s common external tariff as an example, he reiterated that the application of simple, transparent and equitable taxation and tariffs harmonization results in all round gains.
“Elimination of internal tariffs and uniform application of the common external tariff (CET) under the EAC Customs Union has led to reduced tax evasion, increased investments and trade; and increased revenue earnings. In the past five years, the Customs revenue for all the Partner States increased by over 67%, while trade and investments registered annual growths of 20% – 30%,” Amb. Sezibera said.
The challenge, he added, is to come up with a bold but realistic vision and consensus with respect to harmonization of domestic indirect tax and to approach the ideals of harmonized tax rates, harmonized tax structures, policies and simplified procedures that will raise the attractiveness and competitiveness of the EAC Common Market.
SOURCE
East African Community (EAC)
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