Rwanda proposes tax changes in budget

Monday, 13 June 2011 21:55 Bosco Hitimana
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KIGALI, RWANDA
 Rwanda’s treasury is proposing to cut and introduce new taxes to allow successful execution of the new budget for 2011/2012 financial year.
Proposed tax policy measures are expected to create a dust-free environment for the East African country to meet her expenditure plans to safeguard social and economic stability that is vulnerable to changing commodities prices especially fuel and food.
Finance and Economic Planning Minister John Rwangombwa has said that ‘2011 is already proving to be a difficult year for our economy and ‘government’ is deeply ‘concerned about rising domestic food prices especially in the urban areas’.
The government is proposing to reduce taxes on fuel by Rf100 on both petrol and diesel per litre, introduce a gaming special tax of 13% and a withholding tax of 15% and slap a 30% customs duty on rice imports under the East African Common External Tariff (CET) to protect the local rice industry.
The proposed reduction on fuel tax is expected to ease pressure on domestic food costs but this will not be felt in the short run, the minister warned.
The reduction will see fuel pump prices go down but there is no hope that passenger transport costs will go down because the minister says it is below the actual cost. Currently, a litre of diesel and petrol costs Rf1060 on a filling station and the government levies Rf250 and Rf283 on diesel and petrol respectively.
With the proposed tax reduction, which will se Rf50 removed by July and another Rf50 removed by January 2012, the new tax for diesel and petrol will be Rf150 and 183 respectively. This will be in line with what other East African Community partner states charge because Rwanda has been overcharging fuel. Whereas the treasury will incur a loss of Rf14.1b arising from the reduction of fuel taxes, it is expecting to collect Rf186.3m and Rf859.9m in gaming special tax and withholding tax respectively.
The government says that the Rwanda Gaming Corporation has been operating several gaming activities including Casino Kigali, lottery 6/36, slot machines and sport betting since 2009. Yet, the Corporation has not been paying taxes on these activities because the gaming law has not been passed. “We are proposing that this law with the proposed laws be passed by Parliament,” Rwangombwa’s budget speech says.
 
The treasury is also proposing a number of radical measures to raise efficiency in collection of Value Added Tax (TVA) and enforce Pay As You Earn (PAYE). These measures along with many others in place will further bridge the loss the incurred as a result of reduced collections on fuel sales.
Treasury is promising to streamline border operations by increasing the number of hours certain border posts should stay open and introduce electronic cargo tracking to ease faster movement of goods by reducing time wasted during check-in.
The proposed measures are aimed at maximising revenue collection to boost proposed government expenditure amounting to Rf1, 116.9b in 2011/2012 financial year.
Total domestic revenue collections for fiscal year 2011/2012 have been projected at Rf529.4b as against total collections of Rf471.7b in 2010/2011.
“This shows a 49.8% contribution to our total expenditure and net lending expenditure for fiscal year 2011/2012 compared to 47.7% in fiscal year 2010/2011,” the budget speech further says.
Tax revenues will be expected to contribute Rf501.4b whilst non-tax revenue collections have been estimated at RWF 28b.
Direct taxes are expected to contribute Rf199.9b compared to Rf175.8b in 2010/2011, showing an increase of about 13.7% boosted by PAYE and profit tax collections. Taxes on goods and services and international trade are expected to generate Rf261.5b and Rf28b respectively.
For A list of all the tax proposals and measures, look below.
Other Tax Measures Include:
     Implement the EAC Common External Tariffs at the following rates in accordance with the EAC Customs Management Act:
–    Tractors: CET of 0%
–    Trucks carrying capacity exceeding 5 tonnes but not exceeding 20
tonnes: CET of 25%    l    Trucks of carrying capacity of over 20 tonnes: CET of 25%
–   Wheat grain: CET of 0%
–   Wheat flour: CET 35%
–   Construction materials for investors with projects of at least US$ 1.8 million: CET 5%
–    Aluminium conductors and cables: CET 10%
   Provide exemptions to the following imported items from payment of customs duties in accordance with the EAC Customs Management Act:
–    Equipment purchased by the National Police
–    Tsetse fly traps
–    Other security related equipment
–    Motorcycles and ambulances
–  Battery operated vehicles for use in hospitals, hotels and airports
–   Apron buses
     Implement other Tax Administration Measures as follows:
–  Facilitate payment of VAT by companies doing business with
Government entities by deducting VAT at the source.
–    Introduce Electronic Transaction Devices to increase efficiency of
VAT collection.
–    Introducing e-filing and payment to improve on-time spent, reduce
burden to taxpayers and improve service delivery.
-l    Implement electronic single window system at customs that will allow
parties involved in trade & transport to lodge standardized
information & documents using a single point.

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