East African countries are turning agro processing as the new engine of development, according to budget proposals presented last week in Kampala, Dar, Kigali and Nairobi. Kenya has increased import duty on grain wheat from 10% or $50 per tonne to 25%, and zero-rated VAT on taxable supplies of grain silos. It also exempted on duty and zero-rated VAT on insulated tanks used for the transportation of milk and scrapped tax on spare parts for agricultural, horticultural and forestry machinery for soil preparation.

Tanzania has scrapped tax on heat insulated milk cooling tanks, aluminum jerrycans and farming processes such as preparation, cultivation, planting and harvesting are now VAT exempt.

Tanzania has also removed VAT previously provided on locally processed and grown tea and coffee and import duty on yoghurt and other milk products increased from 25% to 60%.

Uganda will exempt tax on income arising out of new agro processing investments, which commenced on July 1, 2008.

The incentive, which will cost some UShs15 billion ($7.1 million), will be open to new investments throughout the country engaged in the processing of Uganda grown produce.

Uganda's finance minister, Ms. Syda Bbumba slashed excise duty on beer produced using local barley and sorghum from 60% to 40%.

All three countries have also placed a lot of importance on the tourism sector whose potential is not fully exploited; the nascent oil and gas industry as well as the young film sectors.

In Kenya, film equipment will now attract no tax, the same as in Uganda and Tanzania.

Ms. Syda Bbumba in her speech made announcements that came out of the EAC pre-budget meeting of finance ministers.

The decisions touched on the full implementation of the Customs Union, entry of Burundi and Rwanda into the Customs Union and environment protection and measures to support the economy.

With a fully fledged Customs Union set to come into force in 2010, the EAC ministers of finance have decided to undertake a comprehensive review, which should be complete by December, on all key aspects of the Customs Union.

This will include administrative and legal framework of the Customs Union, the Common External Tariff (CET) and customs collection and elimination of tariff on intra-EAC trade.

In order to promote tourism in the region, import duty on specially designed tourist vehicles will be remitted.

The EAC states have agreed to remove import duty on essential industrial spare parts imported as replacement parts for use exclusively on industrial machinery.

Such spare parts will qualify for exemption if they are imported by registered manufacturers and not for resale or any commercial purpose other than for replacement of worn out and obsolete parts of industrial machines will be remitted.

Duty on equipment and inputs excluding motor vehicles imported by a licensed company for direct and exclusive use in oil, gas or geothermal exploration and development upon recommendation by a competent authority of a partner state is being remitted.

In order to promote the dairy industry in the region, heat insulated milk tanks for the dairy industry will be duty exempt under the 5th schedule of the EAC Customs Act.

To support the development of the film industry, the ministers decided that the import duty on film equipment be remitted to zero percent. This will give incentives to the filming industry and also create employment for the youth in the region

On transport, the ministers have granted remission of import duty from 25% and apply 10% for trucks of carrying capacity of five tonnes, for one year for Uganda, Tanzania and Rwanda.

EAC ministers also agreed to grant remission of import duty on trucks of carrying capacity of over 20 tonnes from 25% and apply 0% for Uganda, Tanzania and Rwanda for one year.

As the EAC integration deepens through establishment of the common market, the ministers decided that a study on tax harmonization of indirect taxes and incentives; finalization of a code of conduct to avoid harmful tax competition and development of convergence criteria.

The stalled EAC double taxation will be renegotiated and finalized taking into account withholding tax rates as an incentive to promote cross-border investments and entry of Burundi and Rwanda before December 2009.

Bbumba reported that Burundi and Rwanda are to join the Customs Union from July 1, 2009. In addition, Rwanda has aligned her fiscal year to the EAC fiscal year with effect from July 1, 2009.

Uganda's goods will enter Rwanda and Burundi duty free with effect from July 1, 2009 and vice versa.

On environmental protection, the ministers agreed to a total ban on plastic bags for conveyance of goods and liquids. This decision, which has riled investors in polythene manufacture in all three countries, is a follow-up from last year's failed impartial ban.

In addition, excise duty of 120percent will apply on other plastics. A moratorium of six months will be given to the general public as transition period during which persons will make arrangements to find alternative packing materials that are environmental friendly.

In Uganda, Bbumba has given business people a three month moratorium to enable goods in transit and in bonded warehouses be cleared.

"We owe protection of our environment a duty and we cannot relax on this front," Bbumba said. "I seek your understanding that together, we safeguard our environment or else we shall pay an immense price in the future."