Civil Society Organisations have said the East African Community is progressing well I harmonizing the tax regime between the countries.
Under article 83 2 (e) of the treaty for the establishment of the East African Community, partner states are required to harmonize their tax policies with a view to removing tax distortions in order to bring about a more efficient allocation of resources within the community.
Speaking during a post East African Community tax and budget dialogue held via zoom, Jane Nalunga, the Country Director SEATINI- Uganda said a recent survey done in all the East African countries by several Civil Society Organisation indicates good progress on tax harmonization.
“In terms of design and principle, East African Community tax systems are harmonized, for example in terms of charging taxes, apart from some fees which vary but in term of taxes there is a high level of harmonization. Corporate tax, presumptive tax, rental taxes, payroll taxes like pay as you earn, rental income tax, withholding tax and also excise duty, value-added tax, gaming and sports betting, other fees and levies are harmonized,”Nalunga said.
“When it comes to direct taxation, we found there is harmonization direct taxes are based on the principle of imposing income taxes on individuals and corporations based on residence and worldwide principle. It cuts across the four partner states.”
According to Nalunga, in the four East African countries whereas for residents tax is charged on their worldwide incomes, for non -residents it is done from income only sourced from the country.
On Value Added Tax(VAT), Nalunga said all the other Eat African partner states charge 18%, save for Kenya that charges 16% but noted this is not a big gap.
The SEATINI- Uganda Country Director said there are variations in the tax regime for personal incomes in the East African partner states
“When it comes to personal income taxes they greatly vary, especially for low-income earners. For personal incomes below 67dollars, in Uganda, the rate is 10% and people start paying taxes when you earn 67 dollars whereas in Rwanda people starting paying income taxes the moment they earn 30 dollars.”
Nalunga noted that the regime is better in Kenya and Tanzania where people start paying income tax after earning 223 dollars and 116 dollars respectively.
She noted there is need for a change in Uganda and Rwanda
For high-income earners, there is a level of harmonization in the tax regime in the East African partner states.
The SEATINI Uganda boss noted that in Uganda, those earning around 2835 dollars are paying 823 dollars as taxes, in Rwanda they pay 815 dollars, Kenya 892dollars and 721 dollars in Tanzania.
For Capital gain tax, Nalunga said is a big variation with Uganda charging 30%, Kenya 5% and Tanzania 20% but said this needs to be harmonized.