The government of Rwanda through Rwanda Revenue Authority (RRA) introduced a wide range of tax reforms and new laws were enacted to bring Rwandan tax policy and administration in line with 21st century best practices.
Despite these commendable progresses, it is necessary to ensure that the negative impact of taxation on citizens and small-scale businesses as well as to the tax collection efficiency is minimized in light of the famous formula “Too much tax kills tax,” which shows that an exaggerated tax destroys the base on which it is applied, and argues that lower taxes encourage the most dynamic enterprises to invest in earning money, as earnings are less affected by taxes.
In its regular advocacy efforts on issues affecting Rwandan citizens and residents, RCSP in collaboration with other CSO members has this time around conducted an analysis of taxation laws enforced by the local government in collaboration with Rwanda Revenue Authority. A Policy brief on taxation laws was produced. This provided an overview of the current state of taxation in Rwanda and its impact on citizens and small-scale businesses. A number of challenges faced by taxpayers, the level of citizen participation in influencing tax policies were identified.
The analysis was carried out basing the Law N° 020/2023 of 31/03/2023 on tax procedures, the Law No 027/2022 of 20/10/2022 establishing taxes on income, the Law N° 75/2018 of 07/09/2018 determining the sources of revenue and property of decentralized the decentralized entities – commonly known as Property tax Law, the Law N° 37/2012 of 09/11/2012 establishing the value added tax as modified and amended to date.
In that regard, on 23rd August 2023, RCSP in partnership with TROCAIRE and other stakeholders, had a consultative meeting on taxation laws in Rwanda. The aim of the meeting was to engage Stakeholders in the discussion about tax laws and share their knowledge/experience (tax duties & responsibilities) and also for CSOs to propose recommendations to relevant stakeholders on required improvements.
Taxation in Rwanda is anchored in Article 164 of the Constitution which provides that tax is imposed, modified or removed by law and that no exemption or reduction of a tax can be granted unless authorized by law.
RCSP addressing his opening remarks said “There are several spaces from grassroots to the central level of the country’s administration and again, this indicates the political will for consultations. While discussing about laws, a lot has been done. Remaining gaps include limited awareness for tax payers: some people may evade taxes due to low level of behavior change linked with limited awareness! another concern is about VAT refund where tax payers have difficulties in getting the refunds.”
During the consultative meeting, we had a panel discussion where the Panelists were the Director General Tax Policy at Ministry of Finance and Economic planning (MINECOFIN), director of Legal affairs Rwanda Revenue Authority (RRA), Executive Secretary Rwanda Consumer rights protection organization (ADECOR) and the executive secretary RCSP as the moderator.
The moderator started the discussion by a trying to find out how RRA, Tax payers’ communication is effective as regards to obligations of either side.
Since the availability and accessibility of information regarding the tax policy process, including draft legislation and policy documents, are often limited. Each of the panelists had to chance to share with the participants how they are playing their part.
The DG tax policy stated the discussion with a PowerPoint presentation about the taxation policy in Rwanda and the tax reforms that have been made so far.
RRA contributes to the general public awareness and engagement of general public through deferent ways among which are:
- Go on site after publication of laws and chat with tax payers and get their opinions.
- Use different stakeholders for example Ngali Holdings under the Decentralized Fees Collection Project as the sole collector of fees owed to the various districts of Rwanda.
- Use different media like radio talk shows and televisions to create awareness.
- Use different RRA social media platforms, on Facebook, twitter and Instagram among others.
The current state of citizen participation in influencing the taxation policy process presents a mixed picture. For their participation to be reliable, they must first understand their roles among which are:
- Request for EBM receipts after buying a particular item.
- They are not aware of the benefits of requesting for receipts- The business owners ask consumers to ignore the receipts in exchange of a slightly reduced price on that item.
Business owners do not display price tags on all good especially in Super markets
The Executive Secretary ADECOR, encouraged RRA to educate consumers because there is some information he has just heard during the meeting that he did know about. He suggests that RRA should start tax education with ADECOR and then go with them to educate the consumers side they may be skeptical and biased about RRA staff.
In addition, there should be a CSO representation at in the Tax Policy committee to ensure citizen participation in budgeting and other activities. This is very important because the main purpose of CSOs is advocacy and awareness creation and they have the capacity to reach a big number of consumers directly.
The Previous meetings suggested that there should be tax advisors at the RRA offices they should find away this is put into practice to enhance tax education of consumers.
The consultation meeting achieved the following results:
- Stakeholders constructively and actively discussed about tax laws and shared knowledge/experiences about tax duties, responsibilities.
- Proposed recommendations to relevant stakeholders on required improvements.
Conclusion and way forward,
- Tax education of all tax payers is necessary so that apart from paying their taxes well they can actively participate in dialogues such as these. This will be through the consistent identification of challenges on either side or organizing forums for relevant discussion. Panelists agreed to this and vowed their presence whenever invited.
- Conduct research about how to avoid tax escalations by finding alternative products to tax other than food products.
- Increase the duration of the dialogue in any way possible because by the time the meeting ended some of the participants had more contributions to be made.