8 February 2013

Rwanda: Tax Revenues Up By 15 Percent

RWANDA REVENUE Authority collected about Rwf317.8b during the first semester of 2012/13 surpassing the target of Rwf 313.6b. This represents a 15.6 per cent rise from the Rwf304 billion collected during the same period last year. The improvement is attributed to strong economic performance registered and recovery of domestic arrears.

The slow response by the business community to adapt to using e-tax solutions to electronically file and pay tax returns online is still a big huddle.

Ben Kagarama, the Commissioner General of Rwanda Revenue Authority, also attributed the increase in revenue to improvement in Value Added Tax (VAT) payment and the strong economic performance witnessed in 2011.

"VAT invoicing operations and sensitisation continued all over the country and this helped in improving compliance. Positive economic performance registered in 2011 led to increase in income tax pre-payment in September and December 2012 based on profit tax declared by businesses," Kagarama said yesterday.

"It is also important to note that we recovered Rwf7.9b domestic tax arrears after instituting strong recovery mechanisms. There was also an increase in both volume and value of imported goods of 31.8 per cent and 23.9 per cent, respectively, compared to the first semester of 2011/2012."

However, collections could have been higher if some large taxpayers had not evaded taxes.

"Smuggling and tax evasion are still common among the business community," he noted. "There was a decline of VAT turnover and taxable sales declared by some large taxpayers during the last three months of the past semester, leading to lower VAT collections."

The country also witnessed less-than-expected consumption of excisable products like beer, fruits and airtime during the last three months of the semester, a trend that had been anticipated by the Ministry of Finance as a possible outcome of recent aid suspensions by some donors.

Kagarama, however, said the tax authority would not change its fiscal plans.

The tax authority targets to collect Rwf339.8b in the coming semester of 2012/2013.

Online tax payment still a challenge

Kagarama noted that slow response by the business community to adapt to using e-tax solutions to electronically file and pay tax returns online was still a big huddle.

He said only 3,218 taxpayers filed their tax returns electronically out of a taxable base of over 90,000 businesses.

"Some taxpayers are reluctant to switch to e-filing. Also, some commercial banks have delayed to implement the e-payment system. Sensitisation programmes will be carried out so that we can have as many businesses as possible in the e-tax solution net," Kagarama said.

He said the tax body was integrating its services into IT bases to ensure that taxpayers receive high quality and standardised tax services at no extra costs.

Only Bank of Kigali and Commercial Bank of Rwanda have so far fully implemented e-tax payment systems.

Government to pay VAT on tenders

The law on tax procedures was modified and passed by the Parliament, where VAT on public tenders will be withheld by the public institution awarding the tender, a development that lifts the burden off contractors.

In the past, there have been cases where government failed to pay suppliers on time and, thus, causing them to suffer penalties from the revenue body for failure to declare VAT within the stipulated time.

Article 10 of Law Nº38/2012 of 20/12/2012 was modified and now public institutions, rather than contractors, have the responsibility to file a tax declaration in accordance with RRA regulations. It will then pay the tax withheld within 15 days after the end of the month in which the winner of public tender had submitted their invoice.

"This law was modified to be fair to the business community. The government reviewed the process to make it simpler for contractors," Kagarama expalined.

The article reads in part: "A public institution which fails to withhold the value added tax or which withheld value added tax and failed to pay the tax withheld to the tax administration must pay the tax not withheld or not paid, fines and interests as provided for by this law."

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