Consumers could dig deeper into their pockets as the government increases import duty, Importers told The New Times.
Import duty is a tax collected on imports and some exports by a country's customs authorities.
A good's value usually dictates the import duty.
The New Times understands that importers had a meeting with Rwanda Revenue Authority (RRA) discussing the issue.
"Rwanda Revenue Authority explained to the importers the reason behind the rise in taxes on imports. During the meeting, the business community also raised other issues that are affecting them,” said Walter Hunde, the PSF spokesperson.
Denise Uwihirwe , an importer who trades garments in the city centre said that she is not planning to import this month until she understands from the government the way forward.
"For instance, a pullover for which we used to pay $0.6 tax has increased to $2.5 tax. The tax is worsening the situation amidst the increase in the cost of living as commodity prices hike. Most of such goods are imported from China,’ she said.
At least 58 per cent reported an increase in the cost of living according to The Institute of Policy Analysis and Research-Rwanda (IPAR).
Food and non-alcoholic beverages increased by 39.7 per cent in October 2022 compared to the same month of 2021, according to Rwanda’s Consumer Price Index (CPI).
"The import duty started to increase a few months ago. We have recorded a decrease in clients because if I was selling a pair of trousers at Rwf5,000, I have to increase the price too. The situation is worsening because consumers were already feeling the pinch of rising prices on the market,” she said.
Simon Mberabahizi, another importer said that most goods in supermarkets are paying increased import duty.
"Tax on imported food and cosmetics have drastically increased,” he said.
A source who is familiar with customs told The New Timesthat import duty has increased on processed food and other products.
"The import duty used to be 0.0 % on imported raw material, 10 per cent on semi-finished goods and 25 per cent on finished goods. I have realized that increased import aims to discourage import of goods that are made in Rwanda and the East African Community to protect local investors. The tax increased by 35 per cent and 60 per cent on some sensitive imported goods,” he said.
He said that the customs also looked at goods that are not most needed by local consumers.
"For instance, mayonnaise is not much needed by consumers, because without it consumers can still survive. Now as import duty increases, importers also fix the new selling price which is higher,” he said.
He explained that the import duty is established based on the goods’ cost from source up to port and land transport from ports to the country known as The cost, insurance and freight (CIF).
The cost, insurance and freight (CIF) price is the price of a good delivered at the frontier of the importing country, or the price of a service delivered to a resident, before the payment of any import duties or other taxes on imports or trade and transport margins within the country.
"The increase in global prices and import duty will affect consumers,” he said.
An importer of supermarket good city Kigali said: "Import duty on Cooking oil, soaps, rice among others have been increased. There should be a reduction of tax on goods that are most needed by consumers.”
RRA responds to importers queries
Félicien Mwumvaneza, the Commissioner for Customs at Rwanda Revenue Authority told The New Times that import duty was increased to implement the policy for the East African Community.
"The import duty on some goods has increased from 25 per cent to 35 per cent since July this year,” he said.
He said that the most affected goods are supermarket products, shoes, new garments, construction materials such as tiles among others.
"Customs in Rwanda refer to East African Community Customs Management Act aimed to foster regional integration through single customs territory. When an imported goods arrives at Mombasa and Dar es Salaam ports, it is as if it arrives in Rwanda. That is why import duty was harmonized through common external tariff,” he said.
Single customs territory means only one Customs declaration is made in the Country at which goods are consigned.
"We used to have three categories that pay import duty. The first one of imported raw materials was paying Zero per cent, the 2nd second one was semi-finished goods that was paying 10 per cent and finished products that used to pay 25 per cent import duty. Now there is a new category to pay 35 per cent to protect local investors and promote our industrialization. There are factories that produce such goods and should not be imported. It is not necessary to import tiles while we have factories that locally produce them,” he said.
Importers of products such as construction materials, furniture, wine, beauty and makeup products to the East African Community are set to pay more taxes as a new EAC directive comes into force.
A 35% tax rate has to be charged on products that are imported from outside the East African Community yet they are manufactured within the community.
Mwumvaneza said that local industries should increase the quality, quantity of locally made products at affordable prices.
The new tax rate is affecting commodities such as construction materials including tiles, steel bars and barbed wires.
Other products to be taxed include mattresses, packaging, soap, beverages, toilet paper, footwear, vegetables, fruits, and coffee, tea, dairy and meat products.