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Tax Competitiveness Forum

> 4 October 2016

The high level public-private dialogue, which was co-chaired by the Rwanda Development Board and Private Sector Federation (PSF), also sought to find ways to promote tax compliance among the business community to improve revenue collections.

The meeting came on the backdrop of a surge in the number of traders filing tax returns late. According to the tax body, about 60 per cent of all taxpayers remit their taxes late, which contributes to losses. However, during the meeting, the tax body outlined the penalties awaiting those that fail to pay their taxes timely, adding that the law is being amended to reflect the categories of penalties.

Fake EBM invoices

While speaking at the meeting, RRA Commissioner General Richard Tusabe, also said some of the EMB invoices submitted by businesses were fake.

“We have discovered that some value added tax (VAT)-registered taxpayers buy EBMs solely for producing EBM invoices for taxpayers who want to cheat and pay less VAT,” he told the meeting.

According to RRA, about 25 taxpayers are so far suspected to be part of a racket of fraudsters selling fake EBM invoices.

“This malpractice has a negative impact on VAT collections and also affects the business environment in general,” Tusabe said.

He warned tax evaders and fraudsters that they would be dealt with according to the law.

“When a taxpayer uses underhand methods to pay less tax than is due to them, they are committing fraud, which is punishable by law.”

Experts say such vices could greatly affect government targets to raise Rwf1,084.4 billion to finance the 2016/17 fiscal year. This accounts for 55.6 per cent of the Rwf1,949.4 billion of the total national budget for this year.
“Therefore, engagements between public and private sectors are necessary to create sustainable and mutual business reforms, which will make it easy for businesses to pay taxes,” he said. He added that this would also help weed out such vices.

Speaking at the dialogue, Gerald Mukubu, the Private Sector Federation deputy CEO, said there is need to harmonise ‘tax challenges’ with the realities on ground.

According to Mukubu, the private sector is currently contributing more than 56 percent in tax remittances to RRA.
“There is, therefore, need for continuous communication and sustainable strategies that will encourage the business community to comply with tax regulations and file genuine returns and in a timely manner,” he said.

Bus operators cry out

Transport sector players complained about VAT levied on spare parts, claiming it cannot be recovered from passenger fares “since they are set by the Rwanda Utilities Regulatory Agency (RURA).”

The public transporters said this puts them at a disadvantage and eats into their earnings.

“This (ineligibility to collect VAT on fares) has immensely impacted on our cash flows and growth. Remember, counterparts in the region can claim VAT as cross-border public transport does not attract VAT,” one transport operator said.

However, RRA assured them that a situation analysis would be carried out to assess the transport sector grievances and find ways to address them.

Truckers’ exemptions

The logistics sector players complained that the new law on import duty exemption on right hand drive (RHD) trucks excludes carriage trailers.

Speaking at the dialogue, Abdoul Ndarubogoye, the vice-president of Rwanda Transporters Association, called for a review of the law to include carriage trailers. According to the new law, RHD trucks are imported duty free and are only subjected to 18 per cent VAT.

Government approved the importation of RHD trucks and commercial business vehicles, weighing 20 tonnes and above about a year ago to boost competitiveness of the local logistics industry. The Presidential Order published on February 26 in the Official Gazette only covers trucks weighing 20 tonnes and above, as well as cross-border public transport buses and tractors.

However, Ndarubogoye said they pay 10 per cent import tax for trailers and 18 per cent VAT, which they said makes local transporters less competitive in the region.

“So, the trailers should also be exempted from import duties to facilitate the growth of the logistics sector, as well create a ground for local transport companies to compete favourably with regional players,” he said in an earlier interview with The New Times.

In a related development Innocent Bajiji, the head of trade and investments at RDB, has urged the business community to take advantage of the conducive business environment to build sustainable enterprises.
“This means that your operations move smoothly, thus boosting growth,” he said.

Bajiji added that meeting tax obligations is a responsibility of every Rwandan, noting that tax avoidance cripples government plans to deliver services to the community.