Importers of products such as construction materials, furniture, wine, beauty and makeup products to the East African Community (EAC) are set to pay more taxes as new EAC directive comes into force.
Effective July 1, a 35% tax rate will be charged on products that are imported from outside the East African Community yet they are manufactured within the community.
Other products to be taxed include mattresses, packaging, soap, beverages, toilet paper, footwear, vegetables, fruits, coffee, tea, dairy and meat products.
The new tax rate is for the fourth band of the EAC’s Common External Tariff (CET). Common External Tariff is a uniform tariff rate adopted by a customs union or common market, such as the East African Community, to imports from countries outside the community.
According to the Director of Rwanda Association of Manufacturing, Alphonse Kwizera, the products under this band are readily available in the region and therefore will attract more tax to import.
In a communique issued by Rwanda Revenue Authority last week, the new tax rate will affect commodities such as construction materials including tiles, steel bars and barbed wires.
Other products on the list include furniture, mattresses, packaging, beauty and make up products, soap, toilet paper, footwear, vegetables, fruits, coffee, tea, beverages, wine, dairy and meat products
Meanwhile, a recent report by Deloitte, an audit firm, showed that while the new rate will promote industrialisation in the region, it is likely to negatively impact the purchasing power of citizens.
“An increase of 10 per cent points to 35 per cent is too high and will have a significant impact on prices of finished goods, considering other domestic taxes which would affect the purchasing power of citizens,” the firm said in its report.
Deloitte noted that the challenges posed by the new tariff is expected to be compensated by the more incomes earned by the citizens from the additional employment opportunities created through the expected growth in the local industries.
Source: New Times