East African states rush to impose new taxes on imported goods
By LUKE ANAMI
Following the May 5 decision of East African Community Finance Ministers to adopt a 35% rate for the region’s fourth Common External Tariff (CET) band, member countries are striving identify, review and impose new taxes on imported goods to protect local industries. .
The new tax whose implementation starts from July 1 will affect products such as iron, steel, dairy products and meat.
Other imports affected are cereals, cotton, textiles, edible oils, beverages and spirits.
The four bands of the CET include one for raw materials, which attract a zero percent tax, intermediate goods which attract a 10 percent tax; secondary intermediate goods are taxed at 25% and finished products, the fourth band, which now amounts to 35%.
“The process of identifying products belonging to the fourth band is now complete. Most of the products in this band are readily available in the region and hence will attract more import taxes,” said Betty Maina, Kenya’s Cabinet Secretary for Trade, Industrialization and Business Development .
Finished goods that cannot be produced in the region were assigned the third band, she added.
Tariff lines, called merchandise import duties, provide a price advantage to locally produced goods over similar goods that are imported.
Among the tariff lines in the fourth band are furniture, leather goods, fresh cut flowers, fruits and nuts, sugar and confectionery, coffee, tea and spices, textiles and clothing, hairstyles, ceramic products and paints.
The maximum tariff band at 35% was considered the most appropriate rate as it has the most positive impact on long-term regional growth.
“The 35% tariff significantly eliminates the use of suspensions of application (SOA) since some of the EAC Partner States currently apply tariff rates of 35% on more than 50% of products eligible for the fourth tariff band Ms. Maina, who is also the chairman of the EAC Council of Ministers, said.
In its application, a loss of well-being is expected, but this would be corrected by the additional employment opportunities generated by the switch to local production.
Uganda, Kenya and Tanzania are the most affected following the determination of the maximum CET tariff rate for products in the fourth band at 35%.
Indeed, Uganda has called on the region to impose duties on finished iron and steel products to develop its iron and ore industry.
“Implementation of the revised TEC EAC starts on July 1, 2022. It is to be applied flexibly, especially on products affected by the current economic situation,” said Phyllis Wakiaga, CEO of the Manufacturers Association of Kenya. .
“This is a big win for manufacturers, as it will send the manufacturing sector into an upward spiral, which is needed as we grapple with the effects of the COVID-19 pandemic and the Russian-Ukrainian conflict.”
The effective implementation of the 4th band should guarantee the progressive growth and competitiveness of the manufacturing sector.
KAM says this will result in better productivity, creation of employment opportunities, increased incomes and regional prosperity.
“Once implemented, it will spur the growth of various manufacturing sectors in Kenya including food and beverages; leather and footwear; wood, wood and furniture; energy, electricity and electronics; Automotive; Textile and Clothing; plastic and rubber; metal and alloys; and paper and cardboard.
According to the private sector, the 35% tariff rate should have more impact on income, trade creation, job creation and industrial production.