Rwanda Revenue Authority (RRA) has initiated a move to review the regimes for both immovable and corporate tax, following complaints from taxpayers who continue to grumble over burdensome tax rates in the country.
When the government first introduced the revised tax on immovable tax a few years ago, it caused quite a discomfort among the population where the rate increased almost four-fold on a square metre from Rwf80 to Rwf300.
The new tax regime on immovable property was supposed to go in force at the beginning of 2021 but after public uproar, government suspended it, mainly owing to the strenuous economic conditions that prevailed, at the peak of the Covid-19 outbreak.
On the other hand, corporates have also been complaining of the prohibitive income tax, which is currently at 30 per cent, leading to many resorting to using underhand methods to evade meeting their fiscal obligation.
The latest announcement by the revenue body to review these taxes also followed a call by President Paul Kagame to authorities involved to find a balance where citizens are not strained by burdensome tax, but at the same time ensure the country is not deprived of the important tax.
The suggestion the President made during a recent meeting at parliament was to consider broadening the tax base instead of focusing on few people, who also end up evading, so you lose both ways.
The numbers are already pointing in this direction. Information from the revenue body indicates that with a base of approximately 300,000 registered taxpayers, only 50,000 – or almost 17 per cent – pay taxes on regular basis.
There is therefore need to devise innovative ways to bring more taxpayers on board starting with boosting compliance of those that are registered but are not paying, most likely because of the out-of-reach rates.
Tax administration should also be streamlined to ensure that it is more educative rather than being punitive. It would be an easy sale given the efficiency with which the government has been able to put to use the collected taxes.