PUBLISHED ON October 21st, 2014

Businesses decry ‘unharmonised tax policy’ on imported services

KIGALI (Xinhua) — Lack of an East African transfer pricing legislation is limiting companies from trading with one other, thus affecting efforts to boost intra regional trade, top business leaders said on Sunday.

According to company managers, there is a need to have an EAC transfer pricing legislation that is recognized by all partner states. It’s also hindering investors from exploiting investment opportunities that are within the region.

“Businesses are also not happy about some jurisdictions that are imposing significant penalties relating to transfer pricing adjustments by tax authorities, thus affecting the profitability of companies,” Hannington Namara, president Rwanda private sector federation said.

He noted that partner states have recently introduced separate transfer pricing regulations by thus making it difficult for companies to trade with one other with the community.

“The need to put in place a modern excise system which is clear and certain and reflects the current business environment but also enables compliant businesses to move products quickly in the EAC is imperative for the region’s economic development,” David Tarimo, a leading tax expert at Price Water House Coopers (PwC) said.

Failing to have the laws harmonized, could lead to market distortions and therefore spill disaster to regional economic growth, business experts warned.

According to business leaders that attended the just concluded East African Community business Summit, these rules must be harmonized in accordance with the Organization for Economic Co- operation and Development (OECD), so as companies can be able to cross trade more efficiently.

“Could we not do more in terms of harmonizing the tax laws and procedures, including in terms of core legislation, so that companies may trade together,” said Anne Eriksson, Regional Senior Partner, PwC noted.

Eriksson also noted that partner states must overcome their fears and address the question of protectionism if intra trade is to thrive across the region.

Joseline Ogai, Acting Commissioner, Technical Support Services, Kenya Revenue Authority, said it is true member states have differences in the way they regulate laws on transfer pricing in the region.

“Each country is going its way OECD regulations, some are following UN and IMF rules, while others want to have their own rules, however we must start moving towards similar practice, while taking into account our technical differences on all export products,” Ogai noted.

Rwanda is currently reviewing its OECD-based transfer pricing rules and is drafting guidelines under the Commissioner General’s mandate that will allow for more detailed regulations to be put in place.

There is, however, no recent activity on transfer pricing to be noted, although it is clear that the revenue authority staff are now much better trained regarding this issue and are better able to identify cases of miss-pricing in the future.

Richard Tusabe, commissioner general, Rwanda Revenue Authority, said that there is need to have in place a model that is more business friendly but most importantly the one that will account for the various business models across all sectors.

“As members of EAC we should begin to consider waiving VAT on imported services for EAC national as we consider doing it for the multinationals,” Tusabe added.


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