AfricaPress-Tanzania: THE East African Community (EAC) private sector associations and corporates have proposed that the 2020/2021 budgets contain economic stimulus packages that will mitigate the impact of the Covid-19 pandemic on businesses and people, stimulate economic growth and recovery.
They propose that EAC governments inject more money in the market through government spending and adoption of monetary measures.
EAC governments through 2020/21 budgets should unveil stimulus package aimed at injecting money to the sectors that are adversely impacted by the Covid-19 pandemic.
The sectors include tourism, agriculture, manufacturing, health, education and infrastructure.
The stimulus package will inject more money into the economy to stimulate economic growth, cushion east Africans and businesses as countries recover from the Covid-19 pandemic.
Tanzania, Kenya, Uganda and Rwanda will present their budget proposals next Thursday.
Dr Peter Mathuki, the Chief Executive Officer and Executive Director of the East African Business Council (EABC) that coordinates the sector and associations, proposed that the stimulus package should also target to boost the liquidity of Micro, Small and Medium Enterprises (MSMEs) that have been adversely affected by the pandemic.
Given the fact that EAC partner states have not finalised the comprehensive review of EAC Common External Tariff (CET), the private sector associations and corporates have proposed that the budgets make various changes of customs duty in order to promote local production and making locally manufactured products more competitive.
The organisations have called a change of customs duties through different means, such as extending duty remissions to inputs that are not available in the region.
“Duty remission will enable manufacturers import inputs that are not available in the region at a competitive price. Some of the inputs that manufacturers are seeking for duty remission include Completely Knocked Down (CDK) kits for motor vehicles and motorcycles; sugar for industrial use; wheat grain, inputs for manufacturing of beverages and food,” said Dr Mathuki.
Along the same lines, others are inputs for the manufacture of baby diapers, steel alloys for manufacturing leaf spring, RBD stearin, inputs used in the manufacture of energy-saving stoves, ribbons and some paper products. Others are inputs for manufacturing textile and leather products as well as plastics.
Some of the inputs will be used in the manufacture of Personal Protective Equipment (PPEs) used in the fight against Covid-19.
Other proposed changes are to apply Stays of Applications (SOAs) on EAC Common External Tarif (CET) and apply higher tariffs on products that are facing unfair competition from cheap imports or particular partner states have the capacity to produce sufficiently.
They include iron, steel products, ceramic tiles, portland cement and fishing nets. As for domestic taxes, EABC proposes reduction of the Value Added Tax (VAT) rate from 18- 16 per cent to 14 percent so as to stimulate local consumption of goods and services as well as cushion consumers during the period of Covid-19.
Dr Mathuki said the apex body is also proposing zero rate VAT for essential goods to encourage their manufacturing.
They include PPE, sanitisers and facemasks. Governments should set aside enough funds to repay VAT refund claims to improve cash flows for businesses.
On excise duty, EABC is urging EAC governments to refrain from increasing excise duty for petroleum and non-petroleum products.
Maintaining or decreasing current excise taxes on petroleum products and non-petroleum products will control inflation.
A call has also been made to reduce employer taxes such as Resident Income Tax (Corporation Income Tax-CTI) rate from 30 per cent to at least 25 per cent to cushion companies and businesses against challenges of liquidity.
The funds saved from the reduced tax would be used by companies to sustain the business and boost their working capital.
“Also, lower corporate income tax will attract more businesses and investment in the region. In addition, EAC governments should abolish other taxes on employers such as Skill Development Levy and turnover tax rate in order to provide tax relief to employers so that they can continue to retain existing employees and sustain their businesses,” Dr Mathuki spoke of the EABC proposals.
They have also proposed a reduction in income tax – Pay-As- You-Earn (PAYE) from 30 per cent to 25 per cent and give 100 per cent tax relief for persons/employees earning a gross monthly income of up to USD250 so as to increase the net income of employees that in turn will enable workers have more disposable income to spend during the period of the pandemic.
EABC has also called for debt relief and reschedule debt servicing.
On monetary measures, it has proposed EAC budgets to unveil a raft of measures that will be adopted by financial institutions to boost liquidity in the EAC markets. It has proposed lowering the central bank rate and cash reserve ratio.
