EAC’s tax harmony failure holding back trade – lobby

National Taxpayers Association CEO Patrick Nyangweso /HANDOUT

Incomplete and conflicting tax policies across East African countries are undermining the region’s push for a common regional market, players in the tax and governance space have said.

The region is still struggling to harmonise issues such as Value Added Tax, income tax, excise tax and withholding tax whose regimes continue to distort trade, inflate compliance costs and weaken the promise of a unified regional market.

Findings from a regional tax policy dialogue, organised by National Taxpayers Association and East Africa Tax and Governance Network (EATGN), show that only Rwanda among all the East African member states has harmonised all the tax bands.

“Fifteen years after the East African Community (EAC) Common Market Protocol came into force, our journey toward a harmonised tax regime remains incomplete,” said National Taxpayers Association CEO Patrick Nyangweso said.

“These disparities are distorting trade, discouraging investment and diluting the promise of a single market.”

The EAC Common Market Protocol was envisioned to enable the free movement of goods, services, labour, and capital across member states—a goal that remains elusive as each country maintains its own fiscal approach.

Traders and business groups say policy fragmentation not geography is now one of the main barriers to smoother intra-regional commerce. The East African Business Council has repeatedly urged member states to harmonise fiscal measures ahead of budget cycles, arguing that mismatched tax rates and sudden excise hikes create incentives for route-diversion, smuggling and time-consuming paperwork that hit small and medium exporters hardest.

East Africa Tax and Governance Network CEO Leonard Wanyama says that some of the member countries local policies have been hindering a unified approach in adopting regional protocols.

“Individual implementation and local policies are contradicting regional policies. This makes it difficult to move together as a region,” said

Wanyama.The experts pointed out to the disparities within the region, noting that while Kenya charges 16 per cent VAT, most EAC partners including Rwanda, Uganda, Tanzania and Burundi levy 18 per cent, which affects competitiveness and consumption patterns.

“This difference impacts purchasing power and disposable income. In Rwanda, for example, citizens enjoy slightly higher savings and spending ability due to consistent policy alignment,” said Nyangweso.

An EAC Regional Meeting Committee estimate puts the direct cost of non-tariff barriers (NTBs) in the region at $16.7 million (Sh2.2 billion), with a broader trade impact of roughly $94.9 million (Sh12.3 billion).

Those figures capture border delays, administrative fees and compliance friction that reduce trade volumes and raise the effective tax-collection costs for authorities. To tame these losses National Taxpayers Association is now calling on the East African governments to harmonise tax structures on products such as alcohol and tobacco products as part of broader efforts to reduce youth consumption and promote healthier communities.

According to the tax lobby groups, Kenya’s recently adopted National Tax Policy (2023–2026) had introduced progressive, fair and equitable principles to guide future taxation, but noted that neighbouring countries must align their policies to avoid trade diversion and encourage balanced revenue generation. “The National Tax Policy is about creating certainty and fairness in our system,” said Nyangweso.

“It seeks to harmonise corporate income tax bases, streamline VAT exemptions, and align excise structures across the East African Community (EAC).”

Despite the differing views, Nyangweso held that Kenya’s tax reforms were on the right track and called for sustained citizen engagement as the National Tax Policy enters its first three-year implementation phase.