East African Community Countries disrupting their own Common External Tariff agreement

Four out of the eight East African Community Member States that have so far read and endorsed their respective fiscal year budgets, seem to be to still downplaying the regional external tariff agreement.

When it comes to economy, apparently National Interests are overriding regional focus, and therefore the implementation of the East African Community’s Common External Tariff is highly being challenged.

Economic experts discussing during the just held Post Budget Webinar on the implication of 2025/2026 East African Community’s Tax Measures on Regional Trade and Investments, organized by the East African Business Council.

Analysis shows that addressing Common External Tariff (CET) challenges and the comprehensive elimination of Non-Tariff Barriers in the region will unlock USD 63.4 billion in regional trade.

Experts commented that it will also boost the intra-EAC trade by an additional 54 percent.

CET-Defied

“The inconsistent implementation of the EAC Common External Tariff (CET)-manifested through the application of Stays of Application (SoAs) and Country-Specific Duty Remission (SDR)—is a major barrier to the growth of intra-EAC trade,” stated the Acting Executive Director of the East African Business Council (EABC), Adrian Njau.

Both Stays of Applications and Specific Duty Revisions have been found to undermine the EAC Customs Union by disrupting the uniform application of import duties that are supposed to be charged consistently across all EAC Partner States.

“As a result, these measures create an unlevel playing field, encourage imports from outside the region, deter investment, undermine regional value addition, and consequently hinder intra-EAC trade,” Njau maintained.

It has been discovered that in the financial years 2023/24 and 2024/25, SoAs accounted for over 30 percent of total EAC tariff lines, while Country-Specific Duty Remission covered over 10 percent.

Over 70 percent of the SoAs apply to products under the 25 percent and 35 percent CET tariff bands—primarily in the manufacturing and agro-processing sectors—which have been prioritized for diversification and industrialization.

These products mainly include textiles, iron and steel, plastics, paper, and leather goods.

According to EAC Legal Notice No. EAC/171/2025 (30th June 2025) and national Finance Acts, more than 2,464 (accounting for 41.3 percent) tariff lines have been adjusted via stays or remissions.

Slow growth of intra-EAC trade is raising a fundamental question whether the EAC will be able to attain its target of 40 percent intra-EAC trade by 2030.

The low share of intra-EAC trade and fast-growing external trade are mainly attributed to insufficient exploitation of regional trade opportunities, the existence of persistent Non-Tariff Barriers, poor regional industrial value chains and diversification, and inconsistent application of regional trade instruments such as the EAC Common External Tariff (CET).

Each year, the EAC conducts a Pre-Budget Consultative Process where Partner States’ Ministries of Finance and the EAC Secretariat meet to review tax and customs proposals.

The Council of Ministers then approves stays or variations on CET rates through Legal Notices, which temporarily adjust duties (usually for one year).

This year, it is only four EAC countries of Kenya, Rwanda, Tanzania and Uganda that have so far read their fiscal budgets.

Other EAC member countries, Burundi, DR Congo, Somalia and South-Sudan are yet to come up with respective financial bills.

Economic experts here have therefore recommended changes to the CET to be adopted in the budgets starting each July (the EAC financial year).

Apparently, according to the Webinar Participants, The stagnation in intra-EAC trade is further aggravated by the fact that final products benefiting from a country’s Specific Duty Remission that are not of EAC origin are subject to the full CET when traded within the region.

The EABC therefore calls for uniform application of EAC CET by Partner States; elimination of charges of equivalent effect on EAC Originating goods transferred from EAC countries to another and Structured consultations before Pre-Budget cycles, so stays and remissions do not derail regional commitments.

The council also wants clear regional guidelines and timeframes on stays of application (for example a maximum of 3 years with a gradual phase-out) to protect the predictability of the CET.

In 2024, the EAC’s total trade grew by 14.17 percent to USD 124.9 billion, up from USD 109.4 billion in 2023.

Exports surged by 24.72 percent to USD 56 billion, while imports rose by 6.83 percent to USD 68.9 billion.

According to the EAC Budget Highlights 2025, the intra-EAC trade also increased by 9.35 percent, reaching USD 15.2 billion.

In 2024, intra-EAC trade accounted for approximately 12.17 percent of the EAC’s total trade with the world.

This indicates that the majority (about 87.83 percent) of the EAC’s trade is still with external markets, underscoring the need to further deepen regional integration and trade among Partner States to fully harness the benefits of the EAC Common Market and Customs Union.

The Chairperson of the EAC Council of Ministers, Beatrice Askul Moe and Kenyan Cabinet Secretary, stated recently that the growth of EAC total trade is attributed to external trade, which expanded by 14.17 percent, increasing from USD 109.4 billion in 2023 to USD 124.9 billion in 2024, while intra-EAC trade grew marginally by 9.35 percent (from USD 13.9 billion to USD 15.2 billion).

But the EABC in Arusha is calling for annual reviews on stays to ensure there is no distortion to intra-EAC trade and promotion of an EAC-wide duty remission or drawback scheme for industrial inputs to level the playing field across Partner States.

The private sector was required to be actively engaged in national pre-budget consultations to enhance the business environment and ensure that proposed tax measures align with the objectives of EAC regional integration.

The EAC Ministers of Finance have therefore been advised to synchronize pre-budget consultations across the region and ensure early release of the Finance Bill to strengthen private sector involvement.

The East African Community (EAC) should adopt consistent and harmonized tax measures and minimize frequent annual changes to promote business predictability, enhance investor confidence, and enable businesses to tap into the opportunities under the EAC Customs Union and Common Market.

State of Domestic Tax Harmonization in EAC

Harmonization of domestic tax disparities in the region is important to attract intra-EAC investments and boost trade in goods, services, and the free movement of service suppliers, workers, and capital.

In the EAC bloc, Corporate Income Tax is lowest in Rwanda at 28 percent, compared to 30 percent in Tanzania, Kenya, and Uganda.

Taxes on employers-which include social security, the Skills Development Levy, workers’ compensation, and maternity benefits-stand at 14 percent in Tanzania, are minimal in Kenya, 10 percent in Uganda, and 8.3 percent in Rwanda.

Taxes on employees, covering income tax, social security, and maternity benefits, are 40 percent in Tanzania, 35 percent in Kenya, 45 percent in Uganda, and 36.3 percent in Rwanda.

Withholding taxes in particular-dividends and service supplies between locals and foreigners-range from 5 percent (locals) to 15 percent (foreigners) across EAC countries, creating a discriminatory environment for EAC service suppliers and lowering their competitiveness.

Value Added Tax (VAT) rates in Tanzania is 18 percent, Uganda 18 percent, Kenya 16 percent, and Rwanda 18 percent.

Excise duty on services also varies across East African countries.