Rwanda tax on raw materials to affect price of cement

Saturday July 5 2014

Cement packaging at Cimerwa's factory in Rusizi, Rwanda. Rwanda Revenue Authority has raised duty by 25 per cent on EAC cement manufactured using imported clinker. Photo/Cyril Ndegeya

Cement packaging at Cimerwa's factory in Rusizi, Rwanda. Rwanda Revenue Authority has raised duty by 25 per cent on EAC cement manufactured using imported clinker. Photo/Cyril Ndegeya Nation Media Group

By ALEX NGARAMBE The EastAfrican

Cement prices in Rwanda are expected to rise following a decision by the taxman to raise duty on imports.

The Rwanda Revenue Authority (RRA) has raised duty on imported cement manufactured using clinker, a raw material used in making cement, procured outside of the EAC by 25 per cent, a move manufacturers say will raise product prices considering that the country is a net importer of the product.

Under the duty remission scheme, all goods whose raw materials are imported from outside the EAC and exempted from import duty will be subjected to the new tax.

Goods manufactured and whose raw-materials are extracted from within the EAC are not subject to taxes if sold within the bloc.

RRA has now slapped a 25 per cent remission duty on Uganda-based Hima Cement products entering Rwanda, claiming that the cement company imports clinker from outside the region. But Hima denies importing clinker from outside the EAC and has appealed to Rwanda to remove the tax, which took effect this month.

At a stakeholders’ meeting for importers, clearing agents and local manufactures on the newly introduced Customs tariff organised by RRA this week, the Hima Cement country manager said Hima does not import clinker. 

“We don’t import our raw materials; actually, we make clinker on our premises in Uganda. That is why we appeal to the revenue authority in Rwanda to verify this before imposing this tax,” said Jimmy Mugabo, the Hima Cement country manager for Rwanda and Burundi.

The tax on Hima cement under the remission scheme, if not altered, could make the product a little more expensive, since the burden will be shifted to the consumers.

Hima Cement, though imported from Uganda, is cheaper than Cimerwa, a locally manufactured cement retailing at Rwf8,500 ($12) and Rwf9,000 to Rwf11,000 ($13 to $16) respectively.  

The duty remission scheme is under the EAC Customs Management Act of 2004, and the Protocol on the Establishment of the EAC Customs Union.

However, under the scheme, regional companies like Mukwano Industries are not affected when they export to Rwanda because they paid tax on their raw materials prior to manufacture of the final goods.

“Mukwano pays taxes for their raw materials and the goods we distribute in Rwanda don’t pay taxes under the duty remission scheme,” said Omar Kabungo, of Kayonza Distributors Company, Mukwano’s distributors in Rwanda.

However, not all hope is lost for Hima Cement after Rwanda tax authorities promised to verify with their Ugandan counterpart if the cement company does indeed import its raw materials.

Rafael Tugirumuremyi, Commissioner in charge of customs at RRA said that it is only Uganda Revenue Authority that can prove Hima does not import clinker.

“Hima could be right or wrong. We are going to verify with our counterparts in the URA and make a decision based on the information from Uganda,” said Mr Tugirumuremyi.

Rwanda also implemented tax changes for other goods during the recently passed budget which include a 10 per cent tax from 25 per cent for commercial trucks carrying between five and 20 tonnes while trucks carrying above 20 tonnes are paying zero per cent tariff.

Passenger vehicles carrying 25 people are subjected to 25 per cent tax while those carrying more than 50 passengers are at zero per cent.

In the fiscal year 2014/15, total tax revenue collections are projected to increase to Rwf906.8 billion ($1.34 billion) from Rwf782.5 billion ($1.16 billion) in 2013/2014.

To achieve this target, the government will implement tax reforms that include increasing excise duty to 10 per cent on airtime and reducing exemptions on VAT for investment certificate holders under the current investment code. It will also improve revenue collection by enforcing the use of electronic tax devices.