Zitto: Tanzania to lose Sh1.7tr through EPA

Dar es Salaam. Tanzania will lose $865 million (Sh1.7 trillion) in revenue during the 25 years of implementing the Economic Partnership Agreement (EPA) should the East African Community sign the pact with the European Union (EU), according to opposition politician Zitto Kabwe.

Referring to renowned economist Jacques Berthelot, Mr Kabwe said statistics from Eurostat and the International Trade Centre (ITC) showed that EAC would lose 3.6 billion euros in revenue as a bloc.

“Losses will mainly be caused by contractual demands requiring Tanzania to scrap tax barriers by 90 per cent on non-agricultural products from the EU and by 10 per cent on agricultural products,” the ACT-Wazalendo leader said in a statement.

“This means that Tanzania will remain a supplier of raw material and a market to value added products from the EU.”

Mr Kabwe also said Tanzania would lose anticipated revenue following removal of value added tax (VAT) payable as import duty to products from the EU.

Relaxing import duty barriers would lead to trade diversion whereby products from the EU will tend to remove products from foreign countries, thus denying the country revenue, he added.

The Kigoma Urban MP cited Section 99.1 of the contract, saying the partners recognised challenges that would lead to revenue losses, and suggested that a solution could be sought through introduction of a compensation system.

Section 100 of the contract says following revenue losses, the EU will negotiate with partner countries on taxation policy changes, cooperate in changing revenue policies and set aside funds for compensation.

“However, the contract has no clause that shows how such compensation will be reached. The proposal it gives to partner countries to raise VAT charges is inappropriate because it will escalate poverty levels as prices of commodities will have to double,” Mr Kabwe said.

He added that Tanzania’s endeavour to become a middle-income economy through industrialisation should go hand in hand with an intent to protect industries, saying no country had developed industries without protecting them first.

“We should build internal capacity first. World Trade Organisation conditions allow us access the EU market without taxation.”