4minutes read
- As part of the regional tax reforms, import duties on iron and steel, agro-processing, wood and wood products to go up
- The new four-band tariff structure proposed includes zero per cent import duty for raw materials and capital goods
East African Governments propose to raise taxes on imported textiles by between 30 and 35 percent in a move to protect textile industries that is strategic to the development of economies in the region. As part of the regional tax reforms, import duties on iron and steel, agro-processing, wood and wood products etc will also go up. There is also a proposal to classify imported second-hand clothes as “sensitive “with a duty higher than finished products. To protect local industries, the private sector businesses in the region are demanding a 32.5 percent duty on finished products.
The proposal will be presented to the next East African Community Heads of State summit. The 21 st East African Community (EAC) Heads of State Summit was scheduled for Arusha on February 29. However, the meeting was postponed due to lack of quorum.
EAC’s three-band tariff structure came into effect on January 1, 2005. According to the structure, finished goods imported into the regional bloc attract a duty of 25 percent, intermediate goods 10 per cent, with no duty on raw materials. Sensitive items such as sugar, wheat, rice and milk attract a higher duty of above 25 per cent to protect local industries from competition.
The new four-band tariff structure proposed includes zero per cent import duty for raw materials and capital goods, 10 per cent import duty for intermediate products not available in the EAC, and 25 per cent import duty for intermediate products available in the region.
The rate for the highest band, which will be either 30 per cent or 35 per cent for finished products remains a contentious issue. The East African Business Council (EABC), the region’s apex body for private sector business associations, proposed a fourth band, with a rate of 32.5 per cent for finished products. But Rwanda and Burundi, preferred the 30 per cent band while the rest preferred 35 per cent.
Since March 2016, EAC Heads of State have been planning to progressively eliminate importation of used clothing to support the region’s textile and apparel industry. The US is the largest supplier accounting for approximately 20 per cent of total direct exports of used clothing to the EAC, while Chinese exports of cheap, ready-made clothes to East Africa stood at $1.2 billion per annum according to a study by the US Agency for International Development. According to the EAC Council of Ministers the frequent stays of applications by partner states, created distortion affecting the harmonisation of the tariff regime.
