Do you know your company’s total tax contribution to the Government? The amount of tax paid by large businesses is coming under increased scrutiny. Yet they pay considerably more in tax than it might first appear.

If you are an investor, board members or chief executives of one of the large businesses in Rwanda, it is now more important than ever to understand your company’s total tax contribution to the economy and to society.

Clear tax reporting is also becoming increasingly essential for investors, employees and other stakeholders.

A company’s tax contribution and its tax strategy should be looked at from the point of view of all the taxes it bears and collects. Having a clear understanding of its total tax contribution can enable a business to make thoroughly informed business decisions and demonstrate and communicate its social and economic impact and improve monitoring and managing tax risk.

These days, the way corporations are taxed is intensely scrutinised by the public at large. In addition, reporting and transparency requirements for companies are becoming more and more stringent.

It is for these reasons that companies need to understand and monitor their total tax contribution to the government and communicate it accordingly.

This is exactly what the financial services industry in the UK and the mining sector in South Africa did in 2009. The banks in the UK commissioned a survey to find out how much taxes they pay in total as an industry to the UK government. The survey was done by PwC.

According to the results of this survey, it is estimated that the financial services sector contributed nearly 14% of the total taxes collected by the UK Government in the financial year 2009. The survey was conducted on 32 large UK banks.

The data obtained was extrapolated to estimate the total tax take for the whole financial services sector in the UK as a whole.

According to the results, financial services in the UK contributed nearly 27.5 per cent of all the total corporation tax paid to the UK Government.

In addition to that, for every £1 they paid in corporation tax, financial services companies contributed another £1.50 in other taxes in form of taxes collected on behalf of the Government such as PAYE, withholding and VAT.

There has not been such a survey done in Rwanda, and therefore it’s difficult to estimate the total tax contribution different industry sectors in Rwanda make to the government.

However, on the basis of the available data on the taxes paid by the large taxpayers in Rwanda, mobile phone companies, breweries, banks, petroleum companies and manufacturers of consumable goods make the biggest contribution to the government in form of both taxes borne and taxes collected by the companies.

The taxes borne by the companies are those taxes that impact on the company’s profit and loss account. Examples of these include; corporation tax on the company profits, withholding tax on payments made to non residents, which the companies are not able to pass on the non residents, and VAT that the companies may not be able to recover as input tax from the RRA.

Taxes collected include those taxes that the companies collect from employees such as PAYE, taxes collected from their customers such as VAT and excise duty, and taxes collected from their suppliers and service providers such as withholding tax.

On Saturday, 13 August 2011 - during the 10th taxpayer’s Day Celebrations- RRA awarded the top taxpayers in each industry sector, recognising their significant contribution to the national economy.

These top taxpayers demonstrate that it is possible to be a successful and prosperous business while still complying with your tax obligations.

Are you doing the same?  

The author is a Tax Manager,
PwC Rwanda frobsiher.mugambwa@rw.pwc.com