East Africa traders lose millions in illegal levies

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Business Daily Africa, September 05, 2011

Traders are losing millions of shillings daily at border points because they do not know what goods are exempt from duty under the East African Customs Union protocol.

“Some customs officials are exploiting the information gap to demand money on goods which do not fall under the custom duty tax bracket,” Mr Akhaabi said last week during a tour of Busia.

EAC states have been trading as a custom union since January, last year. Goods produced in any of the five member states — Burundi, Rwanda, Uganda, Tanzania and Kenya —can trade without payment of custom duty under the union’s management Act.

But manufacturers must produce Certificates of Origin issued by the national revenue body indicating that such goods qualify to be cleared at the formal border point.

Mr Akhaabi called for aggressive campaigns, including posters at the border posts to inform traders about the levies or exemptions.

Apart from the un-receipted duty, small-scale traders without proper documentation or those who wish to jump long queues have to pay some money for their goods to be cleared at border posts, says Mr Victor Ogalo, regional programmes officer at Consumer Unity & Trust Society (CUTS) international.

Most cross border trade by SMEs involve plant and animal material which are not levied. Exporters must, however, show documents such as sanitary and phyto-sanitary certificates, among other documents, to be allowed to sell across the border.

“These traders, especially the SMEs prefer to pay these extraneous charges rather than have their goods blocked,” Mr Ogalo, who recently conducted a study on informality of cross border trade told the Business Daily by phone last week. He said governments were also losing millions of shillings as the unrecorded charges discourage small traders from formalising their operations.

The study, “Fixing informality in cross border trade,” says most traders, especially SMEs, prefer to pass their goods through informal routes than face what they see as heavy documentation and arbitrary charges at formal border points.

But Kenyan customs officials have dismissed the charges, saying the Kenya Revenue Authority has since simplified its procedures to attract more informal and SME segments into the cross-border trade.

Ms Wambui Namu, the Commissioner for Customs at KRA, says while the level of sensitisation about regional integration is still low, many smaller players are formalising their businesses to take advantage of the new tariff rules.

In the last one year, the Authority released a total of 25, 000 certificates to formal sector traders and another 3, 456 to informal business

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