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The East African : Oct 3rd 2015
34 The EastAfrican BUSINESS OCTOBER 3-9,2015 Rules on ca≥go bad fo≥ g≥owth of Uganda’s vib≥ant t≥ansit business U ganda has always been a hub for transit business destined for Rwan- da, the Democratic Republic of Congo and South Sudan due to its favourable location and Customs policy. Since the neighbouring DRC and South Sudan are landlocked and have also been unstable, businesses have generally opted to buy cargo through bonded warehouses in Kampala, thereby reducing the risk of storing large quantities in their own countries. However, this has changed with Uganda Customs bringing in new policies to discourage the re-export of cargo to neighbouring countries. Customs has recently introduced a new regulation that says cargo can no longer be automatically warehoused in Uganda and importers are to seek permission from Customs prior to warehousing; that permission will only be given at the discretion of the Assistant Commissioner Of Field Services. In the past, and in accordance with the EAC Act Rev COMMENTARY YUSUF ALIBHAI “Cargo can no longer be automatically warehoused in Uganda and importers are to seek permission from Customs prior to warehousing.” 2012 (Section 57), all importers were granted a six-month warehousing period and a further extension of three months to find a market for the goods in the neighbouring countries. However, Uganda Customs is currently only giving 30 days and at times just seven days to warehouse and re-export the cargo. This time is not sufficient due to the regular political problems in the neighbouring countries. No prior notice was given to importers that the Uganda Revenue Authority was planning to amend the period of warehousing. Furthermore, under the single EAC tariff system, cargo going to Uganda could be directly warehoused on the strength of a single entry form filled out in Mombasa. Again, URA has brought in new regulations, whereby trucks cannot offload cargo directly on arrival but have to process another entry on arrival. This is duplication of documentation, which delays the offloading unnecessarily. These new policies will af- fect the economy in the following ways: 1. Trade with the neighbouring countries will automatically go down. 2. The bonded warehouse business in Kampala, which is heavily dependent on the transit business, will die and most bonded warehouse will remain empty. Investments in bonded warehousing and equipment by businessmen will remain idle, rendering employees redundant. 3. Ugandan transporters will lose as the coun- try has been receiving over 400 containers a month that are meant for re-export and pass through Uganda bonded warehouses. 4. Since Uganda is also landlocked, the cargo held in bonded warehouses for re-export has at times helped Uganda alleviate its own shortages. For example, in 2010, when Uganda ran out of sugar and the price of sugar almost doubled, it was the sugar in the bonded warehouses that helped in alleviating the shortage. The indirect effects will be even more devastating for the economy. It is difficult to understand how such policies are implemented without looking at the long term impact on the country’s economy Yusuf Alibhai is involved in the t≥anspo≥t, clea≥ing and fo≥wa≥ding businesses in Uganda Enterprises at the SEZs will enjoy several tax incentives under a controlled environment. Picture: File Kenya’s special economic zones to att≥act mo≥e FDIs By JAMES ANYANZWA Special Correspondent KENYA IS set to stop new investments in its Export Processing Zones before the end of this year after years of official frustration that their operations have failed to add value to the economy despite numerous tax incentives. Faced with revenue col- lection target of Ksh1.3 trillion ($12.13 billion) to finance the government’s ballooning expenditure requirements in the 2015/ 2016 financial year, the Kenya Revenue Authority is looking for means to seal loopholes for revenue leakages while at the same time enforcing tax compliance. The EastAfrican has es- tablished that the EPZ will be replaced by Special Economic Zones (SEZs), which have been created to attract foreign direct investments in the country’s key urban centres. 48,000 The latest follows the Under URA’s new regulation, trucks cannot offload cargo directly on arrival but have to process another entry on arrival. Picture: File Da≥, Kigali join hands to implement SCT By ELIAS MHEGERA Special Correspondent THE TANZANIA Revenue Authority is working with Rwanda to ensure smooth implementation of the Single Customs Territory. This will come as a relief to Rwandan freight forwarders. “With this development, once the de- tails of a cargo have been entered in the system, it can be tracked all the way to its destination,” said TRA Commissioner General Rished Bade He added that such arrangements have been made in all ports, including those of Mombasa and Tanga. All ports in the region “This is an attempt to engage all part- ners,” he said. Mr Bade promised that the initiative between TRA and the Rwanda Revenue Authority will be extended to the whole of the East African Community. On his part, RRA Commissioner General Seka Tusabe said Rwanda had invested in reducing the number of days taken by transit cargo from Dar es Salaam port from five to three, while in the past this could take between 12 and 14 days. “By this move, we have cut the bu- reaucratic red tape without compromising the integrity of our countries’ agreements,” said Mr Tusabe. He added that the development would improve investment and boost profits as it would encourage partnership with Rwanda. John Bosco Mtagana from the Rwan- dese Jaguar Carriers, while lauding the move, asked that shipping agencies being involved in such programmes. signing into law of the Special Economic Zones (SEZs) Bill. “We came up with SEZs as an instrument to attract foreign direct investment,” said James Ojee, Deputy Commissioner of the Domestic Taxes Department at KRA. SEZs are currently un- dergoing a pilot programme in Mombasa, Lamu and Kisumu. At the expiry of their contractual period, existing investors in the EPZs will be required to start paying taxes in line with Kenya’s taxation laws. They will also have a choice to either relocate or reapply afresh to be considered for investments in the SEZs under stringent conditions. “We will allow tax ex- emptions at SEZs but under controlled conditions being very careful not to lose out like EPZ,” Mr Ojee said. The Export Process- ing Zones Authority will be abolished and replaced with Special Economic Zones Authority under the proposed arrangements. Enterprises at the SEZs will enjoy several tax incentives under a controlled environment to ensure that the Kenya government does not lose out on revenues. These include value added tax exemption on all supplies of goods and services to enterprises, reduction in corporate tax to 10 per cent from 30 per cent for a period of 10 years of operation and 15 per cent for the next 10 years. EPZ investors are cur- Direct job opportunities that the EPZ programme had created by June; 15 per cent over the previous year rently enjoying 10-year corporate tax holiday and 25 per cent tax thereafter, 10-year withholding tax holidays and stamp duty exemption. They also get 100 per cent investment deduction on initial investment applied over 20 years and VAT exemption on industrial inputs. The impact of special economic zones on government revenues will be evaluated each financial year and if found below expectations, a decision will be made on whether to continue, according to KRA. Fanuel Kidenda, the chief executive of EPZA, however noted that tax incentives are integral in ensuring competitiveness of SEZ and EPZ investors on a global scale, adding that more important is the need to address systemic issues in the investment environment that have hindered the attraction, facilitation and retention of investments in Kenya.
Sep 26th 2015
Oct 10th 2015