The private sector under its umbrella organisation, the Private Sector Federation (PSF), has asked government to reduce taxes and review the existing tax laws to ease doing business in the country.

The tax proposals are contained in the PSF’s position paper presented to Parliament recently ahead of next week’s 2009/10 budget reading.

While the country’s tax body has prioritised increasing the tax net, according to the business community, "the overall emphasis should not be raising as much money as possible from operators.”

"The goal should be encouraging rapid network development to increase the country’s overall competitiveness,” the position paper Business Times has seen reads in part.

In a detailed proposal to the Finance minister, the business community recommended that the current Rwf30,000 threshold for exempted Pay As You Earn (PAYE) was too low and should be revised upwards.

The business community argued that the current PAYE threshold does not encourage savings.

"If the low income earners are to be encouraged to save from their modest earnings, a significant amount needs to be exempted from being taxed,” the business community said. 

Government has been asked to consider a tax waiver on heavy fuel oils which are used as raw materials but continue to attract import duty and tax.

Currently heavy fuel oil attracts five percent import duty and an additional four percent which is paid for storage plus 18 per cent Value Added Tax (VAT).

The business community suggests that the import duty for industrial raw material be waived and the storage charges revisited in favour of specific service charge.

"If an exemption is granted, this would boost productivity taking into account the fact that, the increased world’s fuel prices is becoming a hindrance to industrial productivity,” the paper suggests.

The PSF said the tax payers registered for VAT were discontented with colossal amount of business capital that gets held up in VAT refunds—something that constrains business cash flows and operations.

This section of taxpayers has proposed that government handles VAT refunds expeditiously to enable the smooth running of companies paying VAT to Rwanda Revenue Authority (RRA). The same issue was raised last year but was never addressed

The business community is also demanding for exclusion of the Value Added Tax (VAT) reverse charges and surcharge on imported sugar.

In the paper, they argued that tax revenue has been increasing steadily, reflecting how the business community is a prime mover in Rwanda’s economic growth.

They cited that the 54 percent in increment of the domestic revenue component of the 2008 budget while external grants represented 46 percent.

The private sector has increasingly raised concern over governmn in the previous budgets been slow at reacting to private sector tax demands. However, as government emplements the Customs  Union starting this July, low external tax tar iffs will be applied.

"We work closely with the private sector and respect their views. We shall try to accommodate them, and even where it is not possible we shall give an explanation.”

James Musoni, the Minister of Finance and Economic Planning said in a phone interview. He however refused to divulge more details, saying he did not want to "pre-empt” his budget speech which is due Thursday next week.  

The private sector has also called for elimination of freight costs in computation of import duties on imports by air, saying it will promote competitiveness of Rwandan Transporters.

The imported trucks are subject to paying five percent import duties in Rwanda, yet in the EAC member countries, particularly in Kenya where there are zero-rated.

The private sector also observed that there is need to have clarity of tax laws as some tax laws are introduced and implemented without the provision of enough clarification to the tax payers.

The sector has called upon government to do much more in the area of tax sensitisation and awareness campaigns by providing timely and adequate clarifications on newly introduced tax laws.

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