1 December 2018

Tanzania Adamant On Taxing Kenyan Confectionery

Photo: Citizen Tanzania
Cnfectionery, juice, ice cream and chewing gum from Kenya could not get preferential access to the Tanzanian market.

There is no end in sight for the Kenya-Tanzania trade wars over sugar and tobacco as the EAC Secretariat has failed to resolve them for the past six months.

Tanzania's President John Magufuli and Kenya's President Uhuru Kenyatta were scheduled to open the Namanga One-Stop Border Post to ease the flow of goods between the two countries despite a number of long-standing trade disputes.

The two presidents are expected to address some of the tariff and non-tariff barriers that have hampered trade between the two EAC partners.

At the last EAC Heads of State Summit in Uganda in February, the two leaders instructed their officials to iron out these issues but little progress has been achieved so far.

Last week, Tanzania said it will not grant Kenyan confectionery duty-free access to its market, and referred the dispute to a panel of experts for further deliberation.

The Dar government said the industrial sugar used in the manufacture of these goods would not be given duty-free access.

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"During a meeting on November 16, Tanzania expressed reservations on the findings of the verification mission, saying the duty-free sugar imported by Kenya in August 2017 still has an impact on locally-manufactured goods and therefore all confectionery transferred from Kenya to Tanzania shall be subjected to external tariffs," said a report by the Council of Ministers.

Kenya protested Tanzania's actions and reiterated that a verification mission was conducted and the report, which confirmed that its confectionery companies did not benefit from sugar imported at zero duty, was signed by respective partner states, including Tanzania.

Nairobi is now demanding that Dar accord the Community's tariff treatment to confectionery from Kenya as per the findings of the verification report without further hindrance or conditions. Kenya has also rejected attempts by Dar to carry out a second verification.

In May, the EAC directed Uganda and Tanzania to undertake a verification mission on sugar by June 24, which saw the Secretariat communicate its findings in July and request partner states to accord preferential treatment to confectionery provided they meet the origin criteria.

Kenya and Tanzania are also locked in a tobacco trade war, where Nairobi is protesting Dar's decision to impose 80 per cent higher excise duty on cigarette transfers into Tanzania, despite the raw materials being sourced in Kenya.

In last week's meeting, both Kenya and Tanzania acknowledged having excise duty structures that are based on local content where it has been defined as materials sourced from each country.

In July, the two countries agreed to champion harmonisation of their domestic taxes and local content policies and requested the EAC Secretariat to fast-track the process of harmonisation.

However, Tanzania now maintains that both parties should implement the bilateral agreement to harmonise their domestic taxes and local content policies.

Kenya, on the other hand, said that this is a trade-restrictive matter and should be resolved at the Community level in accordance with Article 15(2) of the EAC Customs Union Protocol.

Dar argues that it is seeking to protect its contractual obligations with tobacco companies, which require market protection, similar to what Kenya has with Pakistan for rice.

"This obligation extends to provision of extension services to farmers. It also affects local industries that use less than 75 per cent. This is similar to what Kenya has for the beer industry.

Following the outcome of a bilateral meeting between Dar and Nairobi and given that this is a matter that is handled under excise duty, which the Community is yet to harmonise, being aware of the ongoing process in developing the Policy for Harmonisation of Domestic Taxes, as agreed, it will be prudent to await the finalisation of the process and for the Council be advised to direct the two partner states to champion the process," the principal secretaries agreed, and that the Council of Ministers provide guidance on the non-tariff barriers.

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