Joint Kenya, Uganda taxation deals a blow to sugar cartels

Kenya and Uganda on Monday began joint collection of custom taxes on sugar imported through the port of Mombasa, dealing a blow to cartels involved in dumping of the commodity in the regional markets.

Dicksons Kateshumbwa, Commissioner of Customs at Uganda Revenue Authority, said consignments of sugar cleared in Mombasa for warehousing in Uganda are now handled under the Single Customs Territory (SCT) arrangement — which allows for joint collection of customs taxes by the East African Community (EAC) partners.

Uganda has also added containerised refined edible oil, second-hand clothes and shoes as well as alcoholic and non-alcoholic drinks for clearance under the seamless tax system.

“In addition, SCT clearance procedures will also be extended to containerised cargo of the following products; bitumen, cement, steel and steel products with effect from September 7, 2015” Kateshumbwa further said in a notice to traders.

Under the SCT deal that began in 2014, importers of commodities are required to lodge the import declaration forms in their home country and pay relevant taxes first to facilitate the export process.

The tax authorities in the respective countries would then issue a road manifest against the import documents submitted electronically by the revenue authority of the importing country.

READ: Tax bodies to merge Customs clearing systems by end of June

Clearing agents within EAC have been granted rights to relocate and carry out their duties in any of the partner states as part of a strategy to improve flow of goods and curb dumping.

Several commodities including petroleum, steel, edible oils, confectionery and milk are currently traded between Kenya, Uganda and Rwanda under the SCT platform. Cement, cigarettes and neutral spirit were the first products to be handled under the scheme.

The latest move by Uganda is expected to reduce feuds with Kenya and other EAC members over importation of sugar.

READ: EAC Secretariat backs Uganda on sugar and rice trade disputes

Sugar industry regulators and tax agencies in EAC have been involved in frequent standoffs over dumping of duty-free sugar within the region.

The feuds have mainly pitted Kenya against Rwanda and Uganda with the former accusing the two countries of abetting the malpractice that renders its own millers uncompetitive.

At a meeting in Kampala in July 2014, Rwanda was reprimanded and urged to step up surveillance on duty-free sugar imported into its market to avoid dumping in other EAC countries.

Like Uganda, Rwanda was in 2011 allowed to make duty-free imports to cover for a massive shortage of the commodity in its domestic market due to drought. Critics claim part of the imports into Rwanda later found their way into other EAC markets, hurting local millers.

The EAC Council of ministers this year moved to try and seal the loopholes that the cartels use even as it allowed Tanzania and Rwanda to make imports to cover for production shortfall.

The ministers said in June that Tanzania and Rwanda sugar exports to the region will attract full duty after they were allowed to import from outside the bloc at a lower rate to cover for production shortfalls.

It permitted Tanzania to import 100,000 tonnes of sugar at a duty rate of 50 per cent instead of 100 per cent between April and June 2015 while Rwanda was cleared to import 70,000 tonnes at 25 per cent for a period of one year.

READ: Sugar imports from TZ, Rwanda face stiff duties

The council also imposed other conditions aimed at protecting the sugar industries of other EAC economies including Kenya, Uganda and Burundi.

“Rwanda and Tanzania should give first priority by sourcing sugar from partner states that have excess production. During the period of stay of application of CET (common external tariff), sugar from Rwanda and Tanzania will attract CET rates when exported to other partner States,” Harrison Mwakyembe, the chairman of the council of ministers said in an EAC gazette notice in June.

OP The East African