Views: 24
EAC Private Sector Pushes for Harmonized Tax Regime in 2025/26 Pre-Budget Talks
By Naome Namusoke/ KMA updates
Arusha, Tanzania | June 3, 2025 — Leaders of the East African private sector are urging EAC Partner States to accelerate tax harmonization efforts, citing that unified fiscal policies are crucial for achieving a competitive and integrated East African market.
This call was made during the East African Business Council (EABC) Pre-Budget Webinar for the 2025/26 Fiscal Year, held under the theme “Harmonizing Tax Regimes for a Competitive and Integrated EAC Market.” The virtual forum was organized by the EABC in partnership with global consultancy firm PwC and brought together stakeholders from government, private industry, and regional institutions.
Simon Kaheru, Vice Chairperson of the EABC, emphasized that tax disparities among EAC countries are undermining regional economic integration.
“We must fast-track the harmonization of domestic tax regimes if we are to position East Africa as a single, attractive investment destination,” said Mr. Kaheru.
He also appealed to EAC governments to consider and incorporate private sector recommendations into their respective 2025/26 national budgets, which take effect on July 1, 2025. Mr. Kaheru stressed that active private sector inclusion would foster a more cohesive and prosperous East African Community.
Echoing his sentiments, Adrian Raphael Njau, Acting Executive Director of the EABC, urged businesses to take part in pre-budget consultations, noting that informed private sector input ensures that proposed tax measures align with regional integration goals and economic realities.
The webinar presented detailed updates on fiscal policy shifts in Kenya, Uganda, Tanzania, and Rwanda, focusing on the EAC Common External Tariff (CET) and proposed amendments to VAT, income tax, and excise duty frameworks.
Frank J. Dafa, Manager of Trade in Goods at the EABC, outlined the challenges of harmonizing excise duties under the 2019 EAC Policy on Harmonization of Domestic Taxes. According to the policy, Partner States must align excise tax structures including the list of taxable goods, optimal rates, and consistent approaches.
The EAC’s Fiscal Affairs Committee has proposed a minimum excise duty on alcohol of USD 6 per litre of 100% alcohol content, translating to:
USD 0.30 per litre of beer,USD 0.72 per litre of wine,USD 2.40 per litre of spirits.
However, divergent national policies remain a barrier, especially concerning tobacco, non-alcoholic beverages, and fossil fuels.
A comparative review from PwC highlighted significant differences in tax policies across the four countries:
Corporate Income Tax: Lowest in Rwanda at 28%, compared to 30% in Kenya, Uganda, and Tanzania.
Employer Contributions (social security, skills levy, etc.): Highest in Tanzania (14%) and lowest in Rwanda (8.3%).
Employee Tax Burden: Uganda leads at 45%, followed by Tanzania (40%), Rwanda (36.3%), and Kenya (35%).
Withholding Taxes: Range from 10–15% and differ for locals and non-residents, creating unequal treatment for EAC service suppliers.
Private sector calls for the early release of the Finance Bill and an overhaul of the Excise Duty Act. Requests include lowering the Skills Development Levy to 3%, reducing excise duty on telecoms, and introducing lower corporate taxes for SMEs.
Kenya:
Major changes in Income Tax, including a 5-year limit on tax loss carryovers and elimination of investment deductions.
Digital Asset Tax halved to 1.5%, and per diem exemption raised from KES 2,000 to KES 10,000.
VAT reform includes reduced refund periods and status changes for inputs and finished goods.
Introduction of KES 500/litre excise on extra neutral alcohol.
Uganda:
Proposes 3-year tax holidays for citizen-owned businesses under UGX 500 million capital.
Significant hikes in excise duties on cigarettes, beer, fuel, and packaging.
External Trade Bill introduces new levies on exports and infrastructure.
Rwanda:
Launched a six-year tax reform strategy (2024–2030) aiming to reduce exemptions, promote health, and expand the tax base.
Introduced 1.5% Digital Services Tax, age-based excise on vehicles, and a rise in gambling taxes.
VAT exemptions removed from ICT equipment and phones, while consumer goods like beer and juice face increased excise duties.
The EABC warned that unless harmonized, domestic tax disparities will continue to: Distort competition, Inhibit free movement of goods and services, Disincentivize investment, Undermine EAC’s goal of a common market.
“Our ultimate goal is a region where goods, services, people, and capital can move freely—supported by a fair, predictable, and unified tax environment,” said Mr. Kaheru.
As budget finalizations continue ahead of the July 1 implementation date, the private sector remains hopeful that their calls for tax harmonization and inclusive policy making will not go unheard.