A clause in the newly revised excise duty law, which provides that people found guilty of evading consumption tax could face imprisonment, among other penalties, has triggered a debate in the Rwandan Parliament, with some MPs saying it could be harsh and discourage business growth.
The lively conversation took place on Tuesday, April 29, moments before the MPs passed the bill amending a 2023 law.
ALSO READ: Five things to know about Rwanda’s proposed tax on juices
Article 16 of the bill outlines penalties for violations related to tax stamps—required markings on products subject to excise duty to show they are approved for sale in Rwanda.
It lists six offenses for which domestic manufacturers or importers will be held to accountable.
The acts include failure to affix tax stamps to products, affixing tax stamps to products in a manner contrary the law, and making an overprint or defacing tax stamps. There is also submitting an incorrect or incomplete tax stamps reconciliation statement, using tax stamps on products for which they are not intended, and selling products subject to the excise duty without tax stamps.
The bill provides that anyone convicted of these offenses faces a prison sentence of six to 12 months and a fine of up to Rwf2 million.
Some MPs argued that imprisonment may be excessive for businesspeople, especially for minor or first-time offenses.
MP Christine Mukabunani said that while she did not condone tax evasion or the culture of impunity, imprisonment would not the best deterrent.
"Increasing fines would be more effective. Traders seek profits, and heavy financial penalties can serve as a stronger deterrent than jail term,” Mukabunani argued.
MP Germaine Mukabalisa also opposed the jail term provision, citing Rwanda’s 2022 Criminal Justice Policy, which emphasises that detection better deters crimes than harsh punishment.
She said imprisonment increases state costs and overcrowds prisons.
"Heavy penalties alone won't prevent tax evasion. Instead, strengthening enforcement systems, such as those used by the Rwanda Revenue Authority, is what will make such acts difficult to commit,” said Mukabalisa.
For MP Jean-Claude Ntezimana, tax stamp violations might result from honest mistakes or misconduct by third parties.
"A businessperson may not oversee every product daily. Criminal penalties could discourage entrepreneurship,” he said, proposing higher fines and shorter jail terms as a compromise.
MP Emma Furaha Rubagumya suggested the article allow for either imprisonment or a fine—rather than both—so that judges weigh the circumstances and apply proportional penalties, in line with the current criminal justice policy.
MP Odette Uwamariya, chairperson of the Parliamentary Committee on State Budget and Patrimony which scrutinised the bill, said the clause was introduced after tax authorities observed that fines alone were not enough to deter some large-scale businesses from tax evasion, indicating that the businesses subject to excise duty—like factories—deal with significant tax amounts.
"A fine of Rwf1 to Rwf2 million might be minimal compared to how much tax they might evade,” Uwamariya said.
ALSO READ: What you need to know about Rwanda’s new tax reforms
In defense of the bill, Godfrey Kabera, the Minister of State in charge of National Treasury at the Ministry of Finance and Economic Planning said that the aim was not to criminalise errors but to deter intentional evasion.
"The law distinguishes between administrative mistakes and deliberate fraud, such as tampering with tax stamps,” Kabera said.
"Those committing fraud should face serious consequences. The goal is not to increase the number of imprisoned people, but to strengthen compliance with tax laws."
Following the deliberation, Parliament reached a compromise: offenders may be subject to the provided for fine, imprisonment, or both—depending on the severity of the violation and the judge’s discretion.
In the final vote, out of 78 MPs present in the house, 67 supported the article, five opposed it, three abstained, and three votes were null.