Members of Parliament have approved the relevance of the Bill establishing the levy on imported goods for the financing of African Union (AU) operations.
The Bill, if enacted into law, will help the Government collect around Rwf1.5 billion annual dues to sponsor AU affairs as the continent seeks to get rid of donor dependence.
At least $1.2 billion (about Rwf898 billion) is expected to be raised by all African states to cater for the ongoing reforms that seek to address a budget deficit of more than 76 per cent so far funded by donors.
Explaining the basis of the Bill yesterday, Claver Gatete, the minister for finance and economic planning, told lawmakers that the tabling is a follow up on AU Heads of State retreat last year in Rwanda when a formula to fully finance operational budget of AU was adopted.
He said it was agreed that 0.2 per cent of all imported goods be saved to finance the activities, from which 75 per cent of the money would sponsor recurrent and programme budget, while 25 per cent would cater for peace and security.
"This amount of money will be collected by Rwanda Revenue Authority, which we will then deposit it in the central bank before it is channelled to the AU treasury," Gatete said.
"Rwanda should lead this particular effort since it (the levy model) was launched and spearheaded by President Paul Kagame."
The minister added that all items will be taxed with exception to goods imported from East African Community (EAC) and sensitive products under zero tariff, like fertilisers, seeds, industrial machinery, medical equipment, medicine and pharmaceutical products.
Article 4 of the Bill, for example, provides that the levy on goods imported will be collected at the customs point in accordance with the customs legislation, while Article 5 states that levy collected on goods imported will be deposited into a related account opened at the National Bank of Rwanda.
The draft law now proceeds to the parliamentary Committee on National Budget and Patrimony for further scrutiny before it is tabled before plenary for approval.
Reacting on the Bill, MPs questioned measures in place to help other countries fulfill their obligation considering previous irregularities in payment of annual contributions.
"Failure to pay contribution fees earlier was not because countries did not have liquid, rather lack of the will to sponsor AU activities is what has been the issue, is there any mechanism to enforce these decisions," said MP Jean Marie Vianney Gatabazi.
"In case the rate of imports goes significantly down and yet we have to pay our dues, what alternative measures are in place? Are we going to slash from the National Budget," asked MP Marie Josee Kankera.
Minister Gatete said unlike before when countries felt no pressure for contributions to the AU, new reforms seek to hold accountable member states that fail to meet their end of the bargain.
The reforms, which were tabled by President Kagame at the recent AU summit in Addis Ababa, Ethiopia, were about changes in institutions, management and how to realign key focus on priority areas on the functions of the African Union.
In his presentation, President Kagame touched on a number of sectors such as political affairs, peace and security, economic integration (including the Free Trade Area), and Africa's global representation.
Together with his team of experts President Kagame suggested a clear division of labour between the AU, regional economic blocs, regional mechanisms, member states and other continental institutions.