East African Community yet to refund Sh8.7 billion VAT
Arusha. East African Community (EAC) partner states have not refunded value added tax (VAT) amounting to $3.8 million (Sh8.7 billion) to the community’s organs and institutions.
The exemption is required under Article 4 (d) of the EAC Headquarters Agreement with host countries for its autonomous bodies spread across the region.
Through non-payment of VAT refunds, some EAC partner states may merely be paying lip services to the community with some of its officials not aware of the requirements of a host country.
These are articulated under Article 4 (d) of the EAC Headquarters’ Agreement, the Property, Assets, Income and Transactions
Failure by EAC to harmonise the taxation system is also to blame because each country is still stuck to its taxation system.
No measures have been taken against defaulting countries and this is another reflection EAC organs do not have powers to enforce penalties against countries failing to abide by the Treaty requirements.
Under the exemptions, entities pay VAT on taxable goods and services and subsequently claim VAT refunds from the revenue authorities of their respective states.
As of June 30, last year, EAC organs and institutions had not received refunds amounting to $3,879,237, it was revealed here on Tuesday.
The Audited Accounts of the EAC tabled before the East African Legislative Assembly (Eala) said for Tanzania, unpaid tax refunds had accumulated to $2.8 million in three years.
Uganda was second with accumulated unpaid tax refunds during the period ending June 2019 amounting to $430,238, followed by Kenya ($403,363).
Three other EAC states – Burundi, Rwanda and South Sudan – had not refunded $86,900, $67,420 and $1,897, respectively, until June 2019.
The high tax slapped on EAC properties is higher in Tanzania because it hosts more organs and institutions of the community than other countries.
These include the EAC headquarters with three key organs – the Secretariat, Eala, and the East African Court of Justice (EACJ), the judicial arm of the bloc.
Tanzania also hosts the East African Kiswahili Commission (EAKC), an institution of the Community operationalised in 2015 and based in Zanzibar.
It is with the Secretariat, the executive arm of the community with nearly a half of the 400 plus EAC staff and the projects that Tanzania owed $2.2 million to the regional body.
Expected remittances in tax refunds from the Tanzania Revenue Authority (TRA) for Eala and EACJ amounted to $247,967 and $257,645, respectively.
Uganda hosts four EAC institutions ≠ Inter University Council of East Africa (IUCEA), Lake Victoria Fisheries Organization (LVFO) and Civil Aviation Safety and Security Oversight Organization (Cassoa).
The report read by committee chairperson Ngwaru Maghembe, an Eala member from Tanzania, challenged the partner states on delayed VAT refunds.
“There is excess liquidity which is denying EAC organs and institutions access to requisite funds to implement their programmes,” he told the House on Tuesday evening.
He said the VAT refunds was being held by the revenue collecting bodies in the six partner states, noting, however, that they vary from country to country.
The EAC Headquarters Agreements guarantee organs and institutions of the Community to be exempted from paying for goods and services.
Governments insisted for payments of VAT in anticipation the revenue collecting bodies would reimburse which has not been the case.
This, Dr Maghembe observed, was against Article 138 of the EAC Treaty “and directly contradicts the Headquarters’ agreements”.
As a matter of urgency, the committee called on the Council of Ministers, the policy organ of the EAC, to intervene and ensure that the refunds are remitted to the community coffers.
