The East African countries have lost an estimated $7.8 billion worth of revenues on tax exemption and duty remission schemes over the past five years (2015-2019) which translates to a revenue loss of $1.56 billion per annum, according to a study by the EAC Secretariat.
The report on Trade and Investment (2019) shows that Kenya and Tanzanian have borne the brunt of these losses by letting go an estimated $702.76 million and $497.18 million per year respectively.
Rwanda on the other hand, has been losing an average of $201.25 million per year on tax exemptions and duty remissions over the five-year period, followed by Uganda which lost $80.9 million, and Burundi which also lost $79.86 million respectively.
The region has been implementing an exemption and remission scheme since the East African Community Customs Union was established in 2005.
The system involves granting exemption and remission to a number of products that is usually geared towards reducing local production costs and encouraging growth of the export market.
Duty exemption schemes allow duty free import of inputs which are used in the production of goods headed to the export market while a Duty Remission Scheme provides for post export replenishment/ remission of duty on inputs used in the export product.
The report also said that last year, the value of revenue foregone as a result of remissions and exemptions increased in all the Partner States.
In Burundi, the revenue foregone grew by 6.1 percent to $ 89.25 million in 2019 from $ 84.09 million in 2018 while in Uganda, the revenue also foregone increased by 6.4 percent to $93.8 million in the same period.
In Kenya, the value of goods subject to exemptions increased by 4.3 percent to $3.1 billion in 2019 from $3 billion in 2018 while the duty foregone increased marginally by 0.9 per cent to $740.81 from $733.99 million.
In Tanzania, the value of goods subject to exemptions and remissions increased by 10.2 per cent to $2 billion from $1.8 billion while the total amount of revenue foregone increased by 20.9 percent to $533 million from $440.75 million.
On Customs revenue performance the report notes that Burundi’s total customs revenue increased to $221.4 million in 2019 from $199.3 million in 2018 while the share of total Customs revenue to total tax revenue decreased to 41.3 per cent from 42.5 per cent in the same period.
Value Added Tax on imports increased by 11.8 per cent accounting for 47.7 per cent of total Customs revenue.
Meanwhile, Kenya’s total customs revenue increased to $7.6 billion in 2019 from $4.2 billion in 2018, but the share of total Customs revenue to the total revenue, decreased to 31 percent.
In Rwanda, the total customs revenue increased by 36.4 per cent, to $503.8 million with Excise duty and VAT on imports recording an increase of 4.2 percent and 20.6 percent, respectively.
In Tanzania, total revenue increased marginally by 0.3 per cent to $6.74 billion in 2019 from $6.72 billion in 2018.
Tanzania’s share of customs revenue to total revenue amounted to 40.3 per cent in 2019 compared with 39.1 per cent in 2018, with import duty and excise duties performed at 87 per cent and 89.4 per cent of the set targets of $836.4 million and $560.2 million, respectively.
Similarly, customs revenue increased by 3.3 percent to $2.71 billion from $2.62 billion largely due to the growth in excise duty on imports to $500.8 million from $133.7 million.
Copyright: News Central TV
All rights reserved. This material, and other digital content on this website, may not be reproduced, published, broadcast, rewritten or redistributed in whole or in part without prior express written permission from News Central TV.