Rwanda in plans to cut dependence on aid
BERNA NAMATA The EastAfrican
Posted Saturday, May 3 2014 at 16:09

In Summary
Reforms are likely to remove exemption from value added tax (VAT) for
investment certificate holders under the current investment code.
Government plans to continue reducing exemptions — a policy started in 2013/14.
Rwanda plans to implement far-reaching tax reforms in the next
financial year as it seeks to reduce dependence on aid.
The reforms are likely to remove exemption from value added tax (VAT)
for investment certificate holders under the current investment code.
Minister for Finance and Economic Planning Claver Gatete told The
EastAfrican that a revised investment code was complete but declined
to divulge further details.
"It has passed through Cabinet. It is now in parliament," he said,
adding that the revision was done in consultation with various
stakeholders.
"We want to make sure that we have one law that has no loopholes," Mr
Gatete said.
According to the budget framework paper for fiscal year 2014/2015,
which The EastAfrican has seen, the government plans to continue
reducing exemptions — a policy started in 2013/14.
This is in addition to broadening the tax base by including some local
government taxes collected in the districts by the Rwanda Revenue
Authority (RRA).
READ: Reforms boost Rwanda's efforts to attract investors
Total tax revenue collections for 2014/15 are projected at Rwf906.8
billion ($1.33 billion) (15.8 per cent of GDP) against a revised
2013/14 estimate of Rwf782.5 billion ($1.149 billion) (15.3 per cent
of GDP). This represents an increase of Rwf124.3 billion ($1.86
billion).
"The expected recovery of the economy as well as implementation of the
ongoing and new reform measures will allow RRA to meet this tax
revenue target," the document reads.
However, total tax revenue collected in the July-December period of
2013 amounted to Rwf359.4 billion ($528.2 million), some Rwf13.3
billion ($19.5 million) lower than the projected Rwf372.7 billion
($547 million) for this period.
This was attributed to a slowdown in economic activity in 2013 as GDP
growth was constrained at 4.6 per cent, instead of the 6.6 per cent
projected.
This, coupled with a contraction in spending, negatively affected
domestic demand and resulted in lower collections of direct and
consumption taxes.
But revenue collection was also affected by delayed implementation of
some revenue administration measures, which include increasing excise
tax on cellphone airtime. This is expected to be enforced in the next
fiscal year.
Excise duty on airtime is likely to increase from 8 per cent to 10 per
cent in the new financial year.
The implementation of the Electronic Billing Machine to reduce VAT
fraud has been slow.
To minimise tax leakage on VAT collections, the government is now
expected to start levying heavy penalties on businesses that fail to
use the electronic billing devices.
The total budget for fiscal year 2014/15 is projected at Rwf1,753
billion ($2.57 billion) representing 30.5 per cent of GDP compared
with the revised budget of Rwf1, 677 billion ($ 2.46 billion)
representing 32.8 per cent of GDP in 2013/14.
http://www.theeastafrican.co.ke/news/Rwanda-in-plans-to-cut-dependence-on-aid-/-/2558/2302534/-/4sobaa/-/index.html
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