The government has moved to reduce consumption tax on alcoholic drinks brewed from locally sourced raw materials.

In a draft law presented in Parliament on Monday by the Minister for Finance and Economic Planning, Uzziel Ndagijimana, the Government seeks to reduce consumption tax rate on beers and wines made using locally produced raw materials.

Once the proposed amendment to the law on the excise duty on some imported or locally manufactured products and determines the procedure of its collection is approved by Parliament, the consumption tax levied on locally produced alcohol could reduce significantly.

The excise duty levied on beers whose local raw material content excluding water is at least 70 per cent by weight of its constituents, will be set at 30 per cent, down from the current 60 per cent.

The same rule incentivising locally-based production will apply to wines, whose local content excluding water is at least 70 per cent by weight of its constituents, paying 30 per cent excise tax instead of the current 70 per cent.

The current consumption tax law doesn’t distinguish the taxing rate for wines or beers found on the Rwandan market based on whether their ingredients are based on locally-sourced products or not.

It puts the excise tax rate for beers at 60 per cent and wines at 70 per cent, rates at which the proposed law seeks to maintain wines and beers made using non-local raw materials.

Minister Ndagijimana said that the move is in line with the Government’s policy to promote domestic investment and reduce imports.

"It will help spur domestic investment by giving Rwandan farmers a market,” he said in an interview shortly after presenting the proposed amendment in the Lower House.

Ndagijimana said that, once the amendment to the consumption tax law is passed by Parliament, major brewers in the country like SKOL and Bralirwa, may decide to use cereal agricultural products already found in Rwanda and work more with farmers to scale up produce.

"It will help because brewers like SKOL and Bralirwa may decide to use local cereals like wheat and sorghum. If this is done, it means they could buy a lot of raw materials from local farmers and this may promote agriculture because they may use a lot of locally-produced agricultural products for their raw materials,” he said.

The minister said that Rwandans stand to gain from the proposed amendment because money that was being spent to import the raw materials used by the brewers will be spent in Rwanda.

"Cereal farmers, may get market for their produce in the future as a result of this law because factories may start using cereal products from Rwanda,” he said.

MPs on Monday approved the basis of the proposed amendment on the excise tax law, which means that debate on the bill will proceed at the standing committee level before Parliament can finally pass or reject it.

An excise or consumption tax is an indirect tax on the sale of a particular good or service such as fuel, tobacco and alcohol.

‘Indirect’ because the tax is not directly paid by an individual consumer — instead, the revenue collection authority levies the tax on the producer or merchant who in turn passes it onto the consumer by including it in the product’s price.

In Rwanda, excise tax is currently levied on some imported and locally manufactured goods such as fruit juices, lemonade, Soda and other juices, mineral water, beers and wines, brandies, liquors and whisky, cigarettes, gas oil and premium, lubricants,  some vehicles, as well as powdered milk and telephone communications.

editor@newtimesrwanda.com