10 August 2017

Rwanda: Tax Receipts Exceed Target By Rwf8.7 Billion

Rwanda Revenue Authority (RRA) collected Rwf1,103 billion in tax revenue during the last fiscal year 2016/2017, surpassing its target by Rwf8.7 billion, officials revealed yesterday.

Richard Tusabe, the RRA Commissioner General, said the tax body had targeted to collect Rwf1,094.3 billion.

He was presenting the 2016/2017 tax revenue performance report in Kigali on Wednesday.

The revenue body attributed the growth in revenue collections to recent tax reforms, particularly automation, which it said has enhanced efficiency and increased compliancy among taxpayers.

"The introduction of more unified declarations for Pay-As-You-Earn (PAYE) and strong verification mechanisms for value added tax (VAT), among other measures, played a key role in improving the revenue collections across the country," Tusabe said.

"These measures helped reduce tax leakages, especially in VAT collections, and eased the refund process."

This strong performance confirms the tax body's potential to effectively and optimally mobilise the revenue needed to finance Rwanda's development goals, he added.

RRA says, with this stellar performance, it will be easy for the country to raise funds for the Rwf2 trillion national budget this year. Sixty-six per cent of the total finance required for this year's budget will be raised domestically, up from 62 per cent last financial year.

Tusabe said the taxman will devise new ways to widen the tax base. It will also continue its tax education programmes to encourage taxpayers to meet their obligations, which "will increase compliancy".

Decline in local government taxes

Meanwhile, local government taxes and fees collected slowed to Rwf47.9 billion compared to Rwf49.1 billion the previous fiscal year, reflecting a shortfall of Rwf1.2 billion.

But this was 18.6 per cent year-on-year growth from what was collected during the 2015/2016. Tusabe attributed the decline last year to failure to sell off some district properties worth Rwf1.4 billion, which had formed the basis for setting targets for local government collections.

Impact of slow economic growth

Experts agree that a slowdown in the general economic performance had a negative impact on tax collections. They say the effects of the drought on the productivity of the agriculture sector have a bearing on the performance of the economy.

This was visible as revenue from domestic excise duty decreased by 7.2 per cent or Rwf5.2 billion in nominal terms as high food prices "left consumers with less money to spend on non-essential goods".

"This reduced consumption thus affects tax collections, especially VAT," David Baliraine, the EY (formerly Ernst&Young) associate director for tax services, said.

He advised the RRA to find ways to raise revenue from income tax, especially PAYE and profit tax "since indirect taxes are declining due to the exemptions originating from the EAC region."

Other factors that had a negative effect on tax performance include the slowdown in cost, insurance and freight (CIF) growth of imports, especially in non-EAC imports and lower taxable sales as a proportion of turnover because of increases in exempt sales and exports.

Angello Musinguzi, a tax expert at KPMG Rwanda, said focusing on local production and consumption through Made-in-Rwanda campaign will help increase revenue collection going forward.

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