Blog

Is local taxation affecting business developement?

> 6 August 2014

Local business operators, most of them running small businesses, complain that frequent increase of local taxes/fees rates is hampering the development of their businesses. In addition, business people are not consulted by the public authority before taking decisions which are likely to affect their businesses. As a consequence, closure of a good number of boutiques and stands in districts markets due to insolvency has been reported in different districts.

Tax revenues can’t always be raised by increasing taxe rates; the volume of business can also allow the public authority to raise its revenues.
This view was supported by one business operator in Kirehe who explained to us with concrete example that in one of the modern markets of that District, after the increase of monthly hygiene fees from3000 to 5000 Rwf per stand, half of the stands in the market are now empty.

Suppose that there are 80 stands in the market; if the District could collect 240,000 Rwf when a stand is at 3000 Rwf; it is now collecting 200,000Rwf per month making a monthly loss of 40,000 Rwf resulting from the increase.

It is true that Districts need taxes/fees revenues to realize their developmental goals. However they have to seek a balance between reasonable tax rates, business development goals envisaged by the EDPRS 2 and the Country’s Vision 2020. The best way to do that is to have regular consultations with business people mostly whenever there is any business related decision that needs to be taken. In this context, the Rwanda Public-Private Dialogue (RPPD) offers the best opportunity for such kind of consultations.

Bizimungu G. Jean Baptiste
RPPD Consultant.