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Border controls hinder EAC customs union

Discussion in 'International Forum' started by EMT, Apr 12, 2012.

  1. EMT

    EMT JF-Expert Member

    Apr 12, 2012
    Joined: Jan 13, 2010
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    Lack of an agreed mechanism for collection and sharing of customs revenue as well as harmonised domestic tax regimes have failed the East African Community (EAC) Customs Union, a study has indicated.

    Impediments on the free circulation of goods due to unnecessary border controls and continued application of rules of origin on internal trade are among hurdles impeding attainment of a Single Customs Territory (SCT) for the region. The study by MA Consulting Group and Adam Smith International suggests that a robust Information Communication Technology (ICT) revenue management system be adopted to ensure full implementation of the envisaged model, which is facing an array of hitches.

    "This will reduce the risk associated with potential loss of revenue arising from diversion in the region," says the report availed to The Citizen. It calls on EAC to harmonise domestic taxes on goods such as excise duty and Value-Added Tax (VAT).

    The two firms were commissioned by the EAC secretariat to identify institutional and legal frameworks required for the attainment of the SCT in a full-fledged EAC Custom Union.Although the full-fledged Custom Union for the region was expected to be achieved by January 2010 after a transitional period of five years, it is far from being achieved because seamless and free movement of goods remained a challenge to date.

    Problems, which dogged efficient implementation, also include lack of harmonised or approximated domestic tax regimes applicable on cross-border trade, inadequate common systems and lack of an effective common legal framework. The consultants insisted that although internal tariffs have been eliminated, a SCT for the region couldnÂ’t be attained when free circulation of goods within the region was yet to be achieved.

    "Internal customs border controls still exist, rules of origin are still applicable and non-tariff barriers (NTBs) persist," said the summary of the report whose findings were tabled before the recent extraordinary EAC Sectoral Council on Trade, Industry, Finance and Investment in Arusha.

    Goods that originate from other partner states even if qualifying under the rules of origin attract indirect taxes such as VAT and excise (where applicable) across the borders, hence they are subjected to the same customs clearance processes like any other goods from outside the region.

    The EAC partner states were criticised for the slow progress made because they continued to retain control on their revenue collection function since the commencement of the Custom Union and are not prepared to address the matter.

    The report stressed that a regional revenue collection system was imperative and desirable under the Common Market and Monetary Union phases of the regional integration, but blamed the member countries for failure to act. "The partner states are yet to formulate a just revenue-sharing mechanism for tariffs; an element critical to the free flow of goods intra-EAC as it allows for the taxing of goods at the port of entry into the region", it said.

    The Citizen:
    Border controls hinder customs union