Africa-Press – Rwanda. Tax chiefs from East African Community (EAC) partner states are exploring new ways to strengthen domestic resource mobilisation by tackling tax fraud and inefficiencies, which are part of broader efforts to reduce reliance on external financing and build more self-reliant economies.
The officials made the commitment on November 13 during the 53rd East African Revenue Authorities Commissioners General (EARACGs) meeting, which runs through November 14. The forum aims to improve tax administration, enhance regional cooperation, and combat tax evasion and smuggling.
Strengthening domestic revenue systems and tackling fraud
Rwanda Revenue Authority (RRA) Commissioner General Ronald Niwenshuti said the region’s progress in revenue mobilisation has been achieved through expanding the tax net, improving digital systems, investing in taxpayer education, enhancing enforcement, and building a skilled workforce.
He stated that these efforts are underpinned by partnership, coordination, and knowledge-sharing among EAC member states.
Despite the progress made, the region still faces challenges, he said, citing the average tax-to-GDP ratio in the EAC remains below 15 per cent, the threshold considered necessary to support strong economic growth.
High tax expenditures and incentives—amounting to around 2.5 per cent or more of GDP in 2022/23—continue to limit fiscal space.
Illicit Financial Flows (IFFs) are another critical problem, he said, citing the AU High-Level Panel on IFFs, Africa loses $88 billion annually, up from $50 billion in 2015, with commercial activities accounting for up to 70 per cent of these losses.
Rising illicit trade and smuggling are also straining customs operations. In 2023/24, Niwenshuti pointed out, about 52 per cent of cargo was cleared through the “red channel,” compared to 36 per cent in 2017/18.
“This represents a dramatic rise in high-risk consignments entering our ports and borders, adding both financial and operational pressure on our customs administrations,” he said.
“This trend reinforces the need to strengthen border surveillance, intelligence-sharing, and the deployment of advanced technologies for cargo tracking and verification. These challenges are shared across the region – calling for shared solutions to address them.”
In July, RRA stated that in collaboration with its partners, its measures to combat smuggling enabled the collection of over Rwf14.6 billion, through halting 1,430 cases of smuggling – mainly observed in used clothes, alcoholic drinks, and cosmetics imports.
Diana Kisaka, Assistant Commissioner for Finance at the Uganda Revenue Authority (URA) and Chairperson of East African Revenue Authorities Technical Committee (EARATC), said that the Commissioner Generals’ forum brings together all EAC revenue administrations to deliberate on common tax issues.
She said discussions are focusing on simplifying taxpayer registration, using artificial intelligence for revenue collection, harmonising valuation systems, and managing customs bonds.
“Because our borders are also porous, we find that smuggling and movement of goods across the borders becomes difficult to control, which makes trade across our different countries difficult. It affects the markets for the goods across those regions,” she said.
“So, these challenges need to be addressed as a bloc so that we can get solutions that will be agreed upon and will also be implemented across the region.”
To combat fraudulent cargo and smuggling, Alex Mwangi, Acting Commissioner for Business Strategy, Technology and Enterprise Modernisation at the Kenya Revenue Authority, said regional administrations are modernising cargo scanning at border posts. He said that TradeMark East Africa (TMEA) was expected to present new proposals to strengthen cargo scanning and trade facilitation across the region.
Addressing low tax-to-GDP ratios and harmonising tax policies
Mwangi stressed the need to address common regional challenges, particularly the low tax-to-GDP ratio and narrow tax base.
He explained that only a small proportion of citizens and businesses contribute taxes, while the informal sector, though large, contributes little to revenue.
“If we broaden the tax base, then it means we have many people contributing to taxes and therefore you optimise revenue mobilisation,” he said.
Kisaka stressed the need to harmonise VAT rates and tax policies to attract investment and ensure fairness across the region. Regarding the low tax-to-GDP ratio, she said incomplete registration and a large informal economy are major constraints.
“If everyone contributes, the tax rate can remain moderate while revenues increase,” she added.
According to Mwangi, tax expenditure remains high—about 3 per cent of GDP—due to tax breaks and exemptions, further limiting collections.
He credited the East African Revenue Authorities Technical Committee for promoting digital transformation and knowledge exchange, citing Kenya’s adoption of Rwanda’s e-invoicing system as an example of practical collaboration.
Godfrey Kabera, Rwanda’s State Minister for National Treasury, highlighted that EAC countries are seeing strong macroeconomic performance and fiscal resilience. In 2024/25, regional GDP growth averaged 5.8 per cent, while annual revenue growth reached 16 per cent, exceeding national targets.
The tax-to-budget ratio rose from 56 per cent in 2022/23 to 62.6 per cent in 2023/24, indicating that more of the national budgets are being financed domestically.
Still, challenges remain, he said, citing the region’s average tax-to-GDP ratio which is currently at 14.4 per cent, below the 15 per cent threshold commonly viewed as necessary to accelerate structural economic transformation. It also remains far below the levels observed in many middle- and high-income countries, including the OECD average of 34.2 per cent, he added.
“This gap highlights the need for continued improvement in both policy and administration aimed at optimizing domestic resource mobilization. It also underscores the value of regional collaboration, where shared experience, harmonised practices, and coordinated enforcement can help countries respond more effectively in the face of uncertainty,” he said.
Kabera cautioned against “uncoordinated tax incentives” that lead to harmful competition and revenue loss. “Greater policy alignment would strengthen the integrity of our regional market and simplify compliance for cross-border businesses,” he said.
Priorities to consider for regional cooperation
Niwenshuti indicated five key priorities for regional collaboration going forward.
They include to further harmonisation of tax policies and systems, which can minimise harmful tax competition and accelerate implementation of the Domestic Tax Harmonization Framework; to improved cross-border surveillance and enforcement, to combat smuggling, trade (product) mis-invoicing, and illicit financial flows; and enhanced digitalisation and data exchange, so that we can close compliance gaps and detect risks in real time;
Others are more strategic tax reforms and improved management of tax expenditures, to broaden the tax base, enhance fairness, and support fiscal sustainability; and continued knowledge-sharing and peer learning, since our progress moves faster when we learn from each other’s experience.
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