Importers of products such as building materials, furniture, wine, beauty and make-up products to the East African Community are expected to pay more taxes as the new EAC directive comes into force .

Effective July 1, a 35% tax rate will be applied to products imported from outside the East African Community but manufactured within the community.

In a statement issued last week by the Rwanda Revenue Authority, the new tax rate will affect products such as building materials including roof tiles, steel bars and barbed wire.

Other products to be taxed include mattresses, wrappers, soap, beverages, toilet paper, shoes, vegetables, fruits, coffee, tea, dairy and meat products.

The new tax rate corresponds to the fourth bracket of the EAC Common External Tariff (CET). The Common External Tariff is a uniform tariff rate adopted by a customs union or common market, such as the East African Community, for imports from countries outside the community.

According to the director of the Rwanda Manufacturing Association, Alphonse Kwizera, products from this band are readily available in the region and will therefore attract more import taxes.

In a statement issued last week by the Rwanda Revenue Authority, the new tax rate will affect products such as building materials including roof tiles, steel bars and barbed wire.

Other products on the list include furniture, mattresses, packaging, beauty and makeup products, soap, toilet paper, shoes, vegetables, fruits, coffee, tea, beverages, wine, dairy products and meat products.

According to the director of the Rwanda Manufacturing Association, Alphonse Kwizera, products from this band are readily available in the region and will therefore attract more import taxes.

“The maximum tariff band at 35% was considered the most appropriate rate as it has the most positive impact on long-term regional growth,” Kwizera said.

He added that “the intention is to increase value addition and promote local manufacturing. This will likely send the manufacturing sector into an upward spiral, attracting more investment and jobs to the region.

Meanwhile, a recent report by Deloitte, an auditing firm, showed that while the new rate will promote industrialization in the region, it is likely to have a negative impact on citizens’ purchasing power.

“An increase of 10% to 35% is too high and will have a significant impact on the prices of finished products, taking into account other internal taxes which would affect the purchasing power of citizens,” the cabinet said in its report.

Deloitte noted that the challenges posed by the new tariff are expected to be offset by increased incomes earned by citizens through additional job opportunities created through the expected growth of local industries.

However, Kwizera is confident that purchasing power will not be affected. When asked, he replied, “Not really. These are only a limited number of products with a positive impact on industrial growth.

The effective implementation of the CET should guarantee the progressive growth and competitiveness of the manufacturing sector. The result will be improved productivity, creation of employment opportunities, increased incomes and regional prosperity.

The president of Rwanda Freight Forwarders Association (RWAFFA), David Rwigema Mugema, said the CET will not affect importers as they will continue to operate, but will consider the new tariff before determining the final product.

“This new tariff only affects goods coming from outside the East African Community. In this case, we can call it protectionism, local producers can enjoy selling their products at ease in the market, while external producers will be charged very expensively which will affect the prices in the market and this gives an advantage competitive to the local product,” said Mugema.

He added that as the new tariff builds the capacity of local manufacturers, consumers of external products who are determined to buy them will continue to go, regardless of the price.

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