Nairobi, Kenya – The East African Community (EAC) Secretary-General, Veronica Nduva, has sounded the alarm over the increasing number of tax breaks being granted to businesses within the region, warning that these exemptions are undermining intra-EAC trade.
Speaking at a roundtable with the Kenya Private Sector Alliance (Kepsa) on Wednesday, Nduva emphasized that frequent requests for stays of application on taxes for readily available regional products were distorting the market.
“The proliferation of tax holidays and duty remissions is creating an uneven playing field and hindering trade within the bloc,” Nduva said. “Finished products benefiting from these measures cannot compete fairly in the regional market due to preferential tariff treatment.”
The EAC Common External Tariff (CET) is designed to create a level playing field for products imported from outside the bloc. However, the frequent use of tax exemptions is eroding the effectiveness of the CET, according to Nduva.
Kenya has been particularly affected, with 545 disruptions to the CET recorded in the 2024/25 financial year alone, compared to 746 in the previous year.
To address the issue, Nduva proposed closer collaboration between the private sector and governments to reduce reliance on tax breaks. She also advocated for product diversification, specialization, and value addition to boost regional competitiveness.
Despite challenges posed by tax exemptions and non-tariff barriers, intra-EAC trade has grown by 14 percent to $12.2 billion in 2023, compared to $10.7 billion in 2022.
Kepsa Chairperson Jas Bedi acknowledged the problem of tax breaks but also highlighted the importance of addressing other obstacles to regional trade, such as inadequate infrastructure and high electricity costs.
The EAC is now focusing on implementing measures to strengthen the CET and promote fair competition among member states.
