Kezio-Musoke David
22 January 2008
The attainment of Rwanda's $490 million revenue projection for this year now hinges on how soon Kenya's post election violence is contained and the situation brought to normal.
According to the head of media and public relations in Rwanda Revenue Authority, Annette Birungi, the impact is yet to be felt on the revenue collections.
"However, if the situation continues, we might have a crisis of fuel and other commodities that originate from Kenya," Ms Birungi said.
Her remarks come a week after the Uganda Revenue Authority (URA) reported that it was losing over Ush2 billion daily (about $1.2 million) because of the post-election instability. According to URA, Uganda's revenue from import duty, value added tax and excise duty on petroleum and other goods went down by 78 per cent between December 1, 2007 and January 6, 2008.
Landlocked Rwanda, like Uganda, relies heavily on the port of Mombasa for its supply of petroleum products, capital goods such as machinery and cars as well as the export of its coffee and tea.
Post-election violence in Kenya has disrupted the flow of goods to the country, prompting the government to issue strict rationing regulations to all petrol filling stations in order to contain possible fuel shortages.
Also affected are Rwanda's tea exports, forcing the country's tea authority to call off the tea auction in Mombasa.
About 70 per cent of Rwanda's tea is sold via the weekly Mombasa tea auction, while the rest is disposed of direct sales to importers and even domestic buyers.
Kenya is also one of Rwanda's biggest trading partners, exporting goods and services estimated at $112 million to the country in 2007. For some time now, VAT on such imports has been an important source of trade taxes.
Ms Birungi said the feared rise in prices will lead to lowered consumption, affecting both international trade and Rwanda's domestic taxes, hence reducing revenue collections.
Addressing journalists last week, commissioner general Mary Baine said the bulk of the country's revenue projections for the year - $480 million - is expected from fiscal revenues.
Last year, Rwanda collected $450 million from taxes on goods and services. Ms Birungi said most of Rwanda's revenue collections originate from domestic taxes, which contribute about 84 per cent of the total revenue collection, while international trade contributes just 16 per cent of the total collections.
"Domestic taxes make up 35 per cent of the total fiscal revenue, while VAT and excise duty make up 49 per cent," she said.
She explained that VAT on Rwanda's imports only contributes 48 per cent of Customs collections while tariff revenues contribute 34 per cent.
On Rwanda's adoption of the East African Community common external tariff, Ms Birungi said the country has been allowed a transitional period of up to June 2009 to implement the Customs Union Protocol.
The common external tariff (CET) and elimination of internal tariffs are among the key components of a EAC Customs Union. Rwanda and Burundi are required to align their import tariffs with the EAC common external tariff.
"We are planning to implement the CET in June 2009 and then eliminate internal tariffs from January 2009," she said.
Ms Birungi added that since the CET is lower than Rwanda's import tariff on average, it would lead to a likely revenue loss.
"However, we don't have an estimation of revenue loss because we will have to negotiate some changes in the CET. We will have the real picture of revenue loss after those negotiations," she said.
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