The Rwanda Revenue Authority is facing a shortfall of Rwf90 billion in tax collection as the rate of defaulters increases.

Financial experts attribute the high rate of tax defaulters to poor corporate governance in business and a culture of tax evasion.

It is this culture, according to analysts that has sustained the existence of unscrupulous financial advisors who help taxpayers to avoid declaring their taxes.

But the business community claims the economy has been slow resulting in low returns, but tax experts advise the traders to declare their loses to the tax body.

However, there is growing fear that the high default rate could result in a shortfall in revenue, further increasing the country’s dependency on donor aid.

The Ministry of Finance and Economic Planning had raised targets for locally generated revenue to Rwf906.6 billion in a bid to reduce reliance on donor funds.

The high rate of tax defaulting raises questions about the efficiency of Rwanda Revenue Authority (RRA). The tax body is perpetually short of auditors. It can take RRA 10 years to audit a suspected tax evader.

The few auditors the tax body has trained keep leaving for better pay in the private sector. This shortage of auditors forces the tax body to do selective auditing, which has resulted in a high rate of defaults.

“We use risk-based auditing,” said Richard Tusabe commissioner-general RRA, adding that they are unable to carry out routine audits because of the few staff.

RRA may need to create awareness about the need for business to meet their tax obligations.

READ: Rwandan tax body misses targets, campaigns to stop losses

Angello Musinguzi of KPMG said the lack of tax knowledge has contributed to the high default rates.

Obligation

“Business owners have to know that paying taxes is an obligation,” said Mr Musinguzi. adding that the country’s tax system enables businesses to file their returns without involving RRA.

The tax body has introduced platforms such as e-filing and payment, electronic billing machines and mobile tax payment to facilitate taxpayers and make paying taxes easier and convenient.

READ: With cargo tracking, days of tax evaders numbered in Rwanda

Tax experts said that many businesses still behave in an informal way even after they have registered.

“Many business do not pay their taxes. The businesses still behave in an informal way. They have electronic billing machines but they don’t use them,” said Mr Musinguzi.

Records from RRA show that at least 1,000 taxpayers had failed to pay their taxes.

Mr Musinguzi also blamed the tax defaults on some ambiguity in the Rwanda tax laws, which different parties — tax body and taxpayers — interpret for their own benefit.

Some businesses say they are struggling partly because of their low purchasing power.

Most of the defaulting tax payers are medium-size companies that have been grown from being small-size businesses.

When asked why many businesses are defaulting Gerald Mukubu, deputy chief executive officer of the Rwanda Private Sector Federation referred this reporter to individual businesses.