TOP STORY: Rwf 55 billion lost in 2007 due to stringent regulatory environment

Tax is the most problematic regulatory area and these problems arise from compliance with Value Added Tax (VAT), Corporate Income Tax (CIT) and Pay As You Go (PAYE) regulations, as well as preparing for tax audit Rwanda’s economy incurred regulatory compliance costs of at least Rfw 55 billion in 2007, which is approximately 3 percent of the country’s Growth Domestic Product (GDP).
The cover of  the PSF survey dubbed ‘Cutting the Cost of Red Tape’. (Photo/ J .Mbanda).
The cover of the PSF survey dubbed ‘Cutting the Cost of Red Tape’. (Photo/ J .Mbanda).

Tax is the most problematic regulatory area and these problems arise from compliance with Value Added Tax (VAT), Corporate Income Tax (CIT) and Pay As You Go (PAYE) regulations, as well as preparing for tax audit

Rwanda’s economy incurred regulatory compliance costs of at least Rfw 55 billion in 2007, which is approximately 3 percent of the country’s Growth Domestic Product (GDP).

This means that the said amount of money was lost while investors and entrepreneurs were trying to conform with the business regulatory process in Rwanda.

This is according to the report, ‘Cutting the Costs of Red Tape for Business Growth in Rwanda,’ that was launched on Tuesday. The report was commissioned by the Private Sector Federation (PSF) and funded by gtz a German organization.

PSF’s Secretary General Emmanuel Hategeka said, “The study will help us show the challenges faced by the business community in Rwanda and will propel us to draft an action plan that will help us solve some of these problems.” 

The survey that was conducted last year was based on a country-wide sample of 400 formal-sector businesses ranging from large corporations to small enterprises.

In Rwanda, 27,000 businesses operate under the formal sector.

According to the report, the regulatory costs is more than half of the government’s education budget for 2008 which was Rwf103 billion, almost equal to the health budget of Rwf 58 billion and five times higher than the budget provided for under industry and commerce which is Rwf 11 billion.

Tax is the most problematic regulatory area and these problems arise from compliance with Value Added Tax (VAT), Corporate Income Tax (CIT) and Pay As You Go (PAYE) regulations, as well as preparing for tax audit.

The report also says that interactions with Rwanda Revenue Authority (RRA), is still a problem to business people further increasing tax-related regulations.

Business registration and compulsory business closure during business hours because of public meetings and other requirements has been cited as the second most likely areas to be identified as troublesome and time consuming.

Businesses that are engaged in importing and exporting experience have very significant problems associated with regulatory activities. Seventy five percent of Rwanda’s aggregate regulatory costs are suffered by firms in importing and exporting.

Government was recommended to improving the efficiency and predictability of administrative processes associated with tax compliance, reviewing administrative processes associated with importing and exporting.

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