After security, there’s probably nothing more important in national development and sustained economic advancement of any nation than education and taxes.
For while good quality education helps shape young minds towards innovation, invention, discovery and conquering nature for human advancement, taxes actualise this process.
Taxes are not only instituted to enable governments to generate revenue to pay its recurrent and development bills, but to also encourage business, risk-taking, industry, job creation and entrepreneurship.
In other words, good taxation can spur business, ingenuity, development and industry while bad taxation can cripple.
Let us start with what the incumbent is promising to build on.
As articulated in Vision 2020, President Paul Kagame’s government aims to build an economy that is knowledge-based.
So far, Rwanda has achieved universal primary and secondary school attendance with enrolment above 90 per cent.
It has also solved the problem of having few citizens with a university degree, which was a result of the 1994 Genocide against the Tutsi.
However, as the number of graduates increases, many observers say the quality of the education is still low.
On taxation, there are myriad taxes, from VAT at 18 per cent; income/employment tax at 30 per cent; land and property tax, corporate and profit tax to local taxes like trading licence tax and others.
In the past financial year, Rwf1,084.4 billion ($1.2 billion)was raised through taxes, funding 62 per cent of the national budget. This financial year, it is expected that the taxes raised will fund 66 per cent of the country’s budget.
The incumbent is promising to build on these achievements to eventually end reliance on donor aid.
The incumbent’s opponents have also made their own proposals.
To improve quality of education, the Green Party’s Frank Habineza is proposing to increase teachers’ salaries and make French the language of instruction while Independent candidate Philippe Mpayimana is silent on this matter.
However, as any expert on education will tell you, improving quality of education requires more than this. While salaries can boost teachers’ morale, a call for a return to French is either based on nostalgia or an attempt to win the so-called “Francophone” vote rather than a strategy to improve the quality of education.
On taxes, Mpayimana promises to scrap “all taxes not based on productivity,” and “removing taxes on agricultural products and household animals sold in markets by the poor.” He adds that the only “acceptable taxes are those paid by traders and taxes on immovable property.”
On his part, Habineza promises to reduce VAT from 18 per cent to 15 per cent and scrap land and property taxes.
While Mpayimana’s proposal might reduce the tax burden on the poor, targeting tax reductions on productive activity and business is pedestrian as it would discourage investment.
And, of course, Habineza doesn’t seem to understand that, with the local tax base still very low, VAT is probably the only tax paid by almost all citizens and reducing it would decrease revenue.
If Habineza was, for instance, interested in targeting taxes that would put money in peoples’ pockets to boost consumption and in the process increase production and possible job creation, he would reduce income/employment tax from the current 30 per cent to say, 20 per cent.
And, of course, looking at Rwanda’s tax regime, the problem isn’t the percentage of VAT paid, but the penalties and interest associated with noncompliance as well as a complicated tax code and many regulations that burden local businesses.
For instance late payment of VAT, for whatever reason, could attract a penalty of 60 per cent and a cumulative penalty of 1.5 per cent until the debt is paid!
To improve tax compliance requires simplifying the tax code and removing crippling penalties.
Looking at the tax and education proposals from opponents of the incumbent, I would say they need “capacity building” as experts in the aid industry would say, unless they are politicking to gin up votes.
Christopher Kayumba, PhD. Senior Lecturer, School of Journalism and Communication, UR; Lead consultant, MGC Consult International Ltd. E-mail: [email protected]; twitter account: @Ckayumba Website:www.mgcconsult.com