10 January 2014

Rwanda: Tax Revenue Collections Steadily Increasing - WB

Total tax revenue collection is gradually improving, with the two fiscal years seeing 0.8 per cent increase of Gross Domestic Product, according to the World Bank Rwanda economic update report due to be launched next week.

The fiscal year 2011/12 saw a 0.3 per cent increase, with 2012/13 having 0.5 per cent increase to 14.2 per cent.

New measures such as review of the investment code, introduction of a royalty tax on mining, revision of the double taxation avoidance agreement (DTAA) with Mauritius, and enhancement of value-added tax collection, with implementation of electronic billing machines, will continue to boost revenue collections by about 15 per cent.

The report suggests a series of tax administration measures focusing on increasing compliance at low costs for both taxpayers and Rwanda Revenue Authority and limiting tax evasion while accelerating domestic resource mobilisation to 17.7 per cent of GDP in 2015.

The country's actual domestic revenues stood at 16 per cent during fiscal year 2012/2013, actual tax revenues at 14.2 per cent from the anticipated 13.4 per cent during the same period, with non-tax revenue standing at 1.8 per cent.

Despite current expenditure standing at 13.85 per cent, total expenditure and net lending also grew by 29 per cent.

The overall deficit excluding Eurobond-related operations and grants was 2.8 per cent.

Doing Business Report

The World Bank Doing Business report 2014 indicated that Rwanda came number 22 on global scale in complying with taxes and was overall winner in the East African region.

The Commissioner General of Rwanda Revenue Authority, Ben Kagarama, said that the tax body is committed to putting in place measures in place that will make tax compliance more efficient and business friendly.

The report indicates that current national budget has created space for further capital spending increasing it by 13.7 per cent of the total GDP.

Development spending reached 12.3 per cent of GDP in 2012, almost a half (44.8 per cent) of total spending.

Between 2003 and 2012, the compound annual growth rate for capital spending was almost 30 per cent, much higher than the 16.5 per cent for wages and salaries or the 14 per cent for goods and services.

According to the report, sustained recurrent expenditure has been contained at an average of 14.8 per cent of GDP in the 10 years.

The figure is projected to stabilise at about 14 per cent of GDP in the medium term since the adoption of the decentralisation process, transfers to districts form the largest share of recurrent spending, accounting for one-fifth of total spending.

Total expenditure and net lending are projected at 30.1 per cent of GDP in fiscal year 2013/2014. Capital expenditure is projected to increase to 13.7 per cent of GDP, and the share of recurrent spending is projected at 14.1 per cent of GDP.

Rwanda is one of the fastest-growing economies in sub-Saharan Africa, with average annual growth of about 8 per cent since 2001.

The World Bank projects annual economic growth of 6.6 per cent, down from 7 per cent in May 2013. The downgrade is based on macro-economic trends in the first three quarters of the year.

Despite a disappointing, slowing sector growth in the second half of 2013, Rwanda's economy is projected to grow by 7.2 per cent in 2014.


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