Rwandan Taxman to rope in utility managers to meet tax target

Tuesday June 20 2017
informal sector

According to tax experts, the existence of a large informal sector in the region is a challenge to tax collection. PHOTO FILE | NATION


The Rwanda Revenue Authority is resorting to new ways to enhance tax compliance as it seeks to fund 66 per cent of the 2017/18 budget on flat tax rates.

The taxman is now betting on co-operation from utility managers to cut off water and electricity supplies to households with property tax arrears. Rollout of electronic billing machines will also be expanded while Tax Inspectors Without Borders will be hired to audit multinationals.

While the budget expanded by seven per cent, tax remained flat and in some cases exemptions were extended.

RRA has a target to collect Rwf120 billion ($143 million) more in the new fiscal year to fund 66 per cent of the Rwf2.09 trillion ($2.58 billion) proposed budget, using domestic revenues.

“Rwf120 billion is quite a huge sum of money. This is basically an additional Rwf10 billion per month to what we have been collecting. It will come from the existing tax base and new investors who are coming on board,” said Richard Tusabe, the Commissioner General.

The biggest challenge the revenue body faces, according to Mr Tusabe, is that many people are not complying with tax obligations.


READ: Rwanda taxman moves to catch tax evaders

Speaking at a post-budget breakfast organised by PricewaterhouseCoopers (PwC), Mr Tusabe said many people do not declare nor pay their tax; some declare but do not pay on time, or intentionally lower their taxable income to evade tax.

The contribution of tax to GDP is projected to drop from 15.6 per cent last fiscal year to 15 per cent this financial year before settling at 14.9 per cent in 2018/19-2019/20, brought down by increasing incentives and non-compliance.

READ: Taxman warns district officials against illegal taxes


RRA plans to crack the whip on some multinational enterprises that are not paying as much taxes as they should.

Mr Tusabe said the tax body is to source Tax Inspectors Without Borders (TIWB) to audit these multinationals.

The TIWB project was launched in July 2015 by the Organisation for Economic Co-operation and Development and the United Nations Development Programme.

It seeks to plug loopholes that multinationals in developing countries use to avoid taxes.

In Zimbabwe, where inspectors were deployed last year, the country recovered $100 million in new tax revenues generated through TIWB audits, demonstrating the tremendous potential for future projects.

READ: Rwandan police recover Rwf266m from tax evaders

“Audits by RRA have not been effective with some taking almost eight months, or even a year,” said Mr Tusabe.

According to Angello Musinguzi, a tax manager at KPMG Rwanda, RRA must check revenue leaks and deploy information technology in collecting value added tax to meet the tax target.

To Mr Musinguzi, the large informal sector in the region is a challenge to tax collection.

He proposed that RRA invest more in in intelligence gathering and sharing of information with her East African Community peers and sensitisation of citizens on penalties before they apply.

“Taxpayers know that taxes exist but do not know respective penalties and their consequences to businesses,” said Mr Musinguzi.