Tanzanian President Jakaya Kikwete on Friday called for the harmonization of the tax regimes in the East African Community (EAC) to ensure smooth regional trade, the Arusha-based EAC Secretariat said Friday.
President Kikwete urged the five EAC states to harmonise their tax regimes to ensure the smooth operation of the EAC Customs Union and Common Market, launched in July 2010.
The Tanzanian President made the remarks 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.
The talks were jointly organized by the East African Business Council (EABC), TradeMark East Africa and the International Finance Corporation (IFC) of the 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,” the Tanzanian President said.
“This way, we will be able to eliminate tax distortions, which are critical for the smooth functioning of the Customs Union, Common Market, Monetary Union and the whole of the integration process,” Kikwete asserted.
According to an EAC statement, the Tanzanian President said there were fears that still prevail in as far as this matter was concerned, and 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,” he said.
“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,” Kikwete said.
Meanwhile, the Tanzanian leader has lauded the progress made by the EAC Customs Union, which he said had “indeed delivered on the promise of promoting trade” in the region.
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.
President Kikwete encouraged the private sector to “aspire to do more”. “We are barely scratching the surface to the available opportunities for trade in East Africa.”
Meanwhile, EAC Secretary General Richard Sezibera said 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,” Sezibera said.
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%,” 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.