The Value — added tax reward provided for by a new law should be meaningful enough to serve its intended result: to encourage consumers to request electronic receipts for their purchases and boost savings among Rwandan residents, some lawmakers have said.
The law establishing Value Added Tax was passed by the Lower House on July 20. But, it will come into force after its publication in the official gazette.
The law introduced a new article that provides for a VAT reward to a final consumer who requests an invoice generated by electronic invoicing system - such as electronic billing machines (EBMs) - for their purchase(s), then, upon getting it, presents it to the tax administration.
According to the government, this move is intended to address the current situation where there is no clear policy for encouraging the final consumer to request an electronic invoice in order to increase compliance with the obligation to issue electronic invoices.
However, the law did not specify the value (amount) of such an award, but rather, provided that it will be determined by an Order of the Minister in charge of taxes. It added that the Order will also determine the conditions for granting such a reward.
MP Theogene Munyangeyo said he commends the government's acceptance to grant a VAT incentive to consumers, pointing out that this has been a debate for about six years.
He wanted to know whether the ministerial order, which will determine the value of the reward to consumers, was discussed by the lawmakers who analysed the bill - under the Committee on National Budget and Patrimony.
This practice, he said, would be in line with the parliament's decision to tell public entities that as they table bills before parliament, they also have to bring ministerial orders that would contribute to their implementation, so that MPs know whether what they are providing for matches the intended outcome.
He suggested that as the Government of Rwanda maintains 18 per cent VAT, it could retain 16 per cent as the same VAT rate charged in Kenya, then use two per cent as an incentive to consumers for the goods and services they have purchased and for which they have electronic receipts.
"I wanted to know if the amount that would be given to a consumer was decided, so that we understand whether it can help encourage savings among Rwandans, including savings culture on purchases," he said.
MP Frank Habineza said there have been wishes from some Rwandans and civil society requesting that the VAT be reduced from the current 18 per cent to at least 14 per cent.
"We realised that 18 per cent VAT rate was high ... it would be better if we bring it to 14 per cent," he said, pointing out that Kenya charges 16 per cent.
On the question about the amount of reward to consumers, the Chairperson of the Parliamentary Committee on National Budget and Patrimony, MP Omar Munyaneza, said the government told lawmakers that the process to determine it was not yet finalised.
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Meanwhile, he pointed out that parliament has a responsibility to carry out oversight to ensure that the Ministerial Order provided for by the law is set within the due course to support legal enforcement.
Responding to the query concerning the need to lower VAT, Munyaneza said that the government explained it found that the top priority was to exempt processed maize flour and rice from VAT under the law, as a means of lowering the cost of these staple food items that are needed by many Rwandan residents.
In the financial year 2021/2022, VAT was the top tax contributor for Rwanda as it generated over Rwf593 billion, which represents 32 per cent of more than Rwf1,852 billion total tax revenues that Rwanda Revenue Authority (RRA) collected in that financial year, according to data from its 2021/2022 annual report.
