EAC taxes highest in the world – report

Leah Brown (Busiweek)-- African businesses including East African holdings are facing the highest taxation levels than anywhere in the world, says a report by PriceWaterHouseCoopers (PwC).

‘At least 68 per cent of the profits by most companies are paid to governments in the form of tax. This is the highest amount than anywhere else in the world,’ states the report in part. Despite this, Africa including East Africa member states, has high potential for growth within the coming 12 months, the report says. This compares better than the Western countries and the rest of the world where businesses, due to other reasons including the global economic downturn, may either not grow at all or grow at an extremely slow pace.

According to the report dubbed ‘Africa at a Crossroads’, many company chief executive officers based in Africa express confidence that businesses would beat the odds regardless of the challenges they face. The PwC report involving 1,200 company officials and government leaders in a number of African countries, noted, however, that heavy taxation remains one of the major challenges that businesses in Africa face.

The report also showed that Africa has demonstrated ‘the highest confidence and anxiety among their global peer’. The ‘anxiety index’ - a theoretical measure of concern of about 20 potential threats to business growth - shows Africa out in front with a score of 52.39 per cent compared to the global average of 38.89 per cent. Some of the challenges that face the businesses that are operating in Africa include heavy general poor infrastructure, shortage of labour, and general environment of doing businesses that include many days it takes for one to register a company and get recommended licenses.

The PwC report that was launched on 5 May, the day when the three-day World Economic Forum for Africa was opened in Dar es Salaam, says businesses in Africa stand a better chance to grow fast that their counterparts in other parts of the world. ‘Some 87 per cent of CEOs headquartered in Africa anticipate regional expansion in the next 12 months, the highest percentage among CEOs headquartered anywhere in the world.

‘Their optimism contrasts sharply with that of the global CEOs, whose confidence has plummeted from similar levels three years ago following the global financial downturn,’ says the report in part. ‘There is a relative sense of confidence in many African countries, thanks to the muted impact of the economic downturn’, adds the report.

‘And in many ways the business environment continues to improve driven by relentless economic social and political changes,’ said territory partner, PCW Africa Central, Philip Kinisu. According to Kinisu, this means that businesses are increasingly focused on growth within the region and tapping new consumers in the existing markets.

The PwC country senior partner, Leonard Mususa, said there was need to rely on internal markets to look for new customers who can help businesses grow. ‘Africa has a huge market. It is through proper utilisation and provision of goods and services to these markets that can help businesses to grow. No wonder, despite the challenges, our businesses have high potentials for growth,’ noted Mususa who is also PwC Tanzania CEO.

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