WHAT YOU NEED TO KNOW
INTRODUCTION: Article 16 of the Common Market Protocol provides that the Partner States shall guarantee the Free Movement of Services supplied by nationals of Partner States and the free movement of service suppliers who are nationals of the Partner States within the Community.
FREE MOVEMENT OF SERVICES SHALL COVER THE SUPPLY OF SERVICES:
a) From the territory of a Partner State into the territory of another Partner State;
b) In the territory of a Partner State to provide a service to consumers in another Partner State(s);
c) By a service supplier of a Partner State, through commercial presence of the service supplier in the territory of another Partner State; and
d) By the presence f a service supplier, who is a citizen of a Partner State, in the territory of another Partner State.
WHAT IS A SERVICE?
For the purpose of the East African Common Market, “services” includes:
a) Services in any sector except services supplied in the exercise of governmental authority which are not provided on a commercial basis or in competition with one or more service suppliers;
b) Services normally provided for the remuneration, as far as they are not governed by the provisions relating to free movement of goods, capital and persons.
WHAT ARE THE GENERAL EXCEPTIONS FOR TRADING IN A SERVICE?
A Partner State may restrict trade in Services by nationals of other Partner States to protect measures:
i. Necessary to protect public morals or to maintain public order;
ii. Necessary to protect human, animal or plant life or health;
iii. Necessary to secure compliance with laws or regulations which are not inconsistent with the provisions of the Common Market Protocol including those relating to:
a. The prevention of deceptive and fraudulent practices or which deal with the effects of a default on services contracts;
b. The protection of the privacy of individuals in relation to the processing and dissemination of personal data and the protection of confidentiality of individual records and accounts; and
iv. Inconsistent with Article 17 of the Common Market Protocol, provided that the difference in treatment is aimed at ensuring the equitable or effective imposition or collection of direct taxes in respect of services or service suppliers of other Partner States; or
v. Inconsistent with Article 18 of the Common Market Protocol, provided that the difference in treatment is the result of an agreement on the avoidance of double taxation or provisions on the avoidance of double taxation in any other international agreement or arrangement by which the Partner State is bound.
HOW SHALL PARTNER STATES ENSURE THAT THERE IS EQUITABLE OR EFFECTIVE IMPOSITION OR COLLECTION OF DIRECT TAXES?
The Common Market Protocol provides measures that are aimed at ensuring the equitable or effective imposition or collection of direct taxes and they include measures taken by a Partner State under its taxation system, whish shall:
a) Apply to non – resident service suppliers in recognition of the fact that the tax obligation of non – residents is determined with respect to taxable items sourced or located in the territory of the Partner States;
b) Apply to non – residents in order to ensure the imposition or collection of taxes in the territory of the Partner States;
c) Apply to non –residents or residents in order to prevent the avoidance or evasion of taxes, including compliance measures;
d) Apply to consumers of services supplied in or from the territory of another Partner State in order to ensure the imposition or collection of taxes on such consumers derived from sources in the territory of the Partner States;
e) Distinguish service suppliers subject to tax on worldwide taxable items from other service suppliers, in recognition of the difference in the nature of the tax base between them; or
f) Determine, allocate or apportion income, profit, gain, loss, deduction or credit of resident citizens, companies or firms or the branches of the companies or firms or their branches, in order to safeguard the tax base of the Partner State.
WHAT SECURITY EXCEPTIONS EXIST ON TRADE IN SERVICES?
Article 22 of the Common Market Protocol provides that none of the following aspects shall be construed:
i. To require any Partner State to furnish any information, the disclosure of which it considers contrary to its essential security interests;
ii. To prevent any Partner State from taking any action which it considers necessary for the protection of its essential security interests:
a. Relating to the supply of services carried out directly or indirectly for the purpose of the provisioning a military establishment;
b. Relating to fissionable and fusionable materials or the materials from which they are derived;
c. Taken in time of war or other emergency in international relations; or
iii. To prevent any Partner State from taking any action in pursuance of its obligations under the United Nations Charter for the Maintenance of International Peace and Security.
iv. The Partner States shall, to the fullest extent possible, inform the Council of measures taken under sub-paragraphs (b) and (c) of paragraph 1 and of their termination.
HOW IS THE IMPLEMENTATION OF THE FREE MOVEMENT OF SERVICES DONE UNDER THE COMMON MARKET PROTOCOL?
Article 23 of the Common Market Protocol provides that implementation of Free Movement of Services (Article 16 of the Protocol) shall be progressive and in accordance with the Schedule on the Progressive Liberalization of Services, specified in Annex V to the Protocol.
The Partner States, undertake to make additional commitments on the elimination of restrictions on the service sectors and sub- sectors that are not specified in Annex V of the Protocol and the Council shall issue directives on the modalities for implementation.