Smuggling hurting revenue collection

The Treasury is losing millions to a racket of smugglers from neigbouring countries.

The Treasury is losing millions to a racket of smugglers from neigbouring countries.

Mary Baine, Commissioner General, Rwanda Revenue Authority (RRA) said lots of liquors, alcohol and wines are smuggled on Lake Kivu

The goods are declared as on transit, but when they reach destinations the cargo is smuggled back into Rwanda. World over goods on transit are not taxed.

"We are having smuggling problems especially with goods from our neighbours who use Lake Kivu. However we are trying to address that problem. Soon we will have speed boats patrolling the lake," Baine said in a recent interview with The New Times at her office in Kimihurura.

The vast part of Lake Kivu, West of the country is shared between DRC and Rwanda. After a tip off that unscrupulous traders in the country were smuggling, Revenue Protection Service, the anti smuggling arm of RRA has since stepped up the crackdown on the illicit trade.

Several cartons of expensive spirits, liquors and wines have been impounded, and some racketeers face prosecution.

Recently the officers impounded 120 cartons of smuggled liquors valued at Frw6 million.

"Every month we impound close to 100 cartons of liquors," Eugene Torero, RRA Deputy Commissioner General said.

The openness with which these people operate is not surprising, the profitability of smuggled liquors on the Rwandan market makes many risk.

"We are trying our best. But we can’t be every where at every time," Torero said.

Meaning the RRA team is trying to make a dent in the illicit trade, but they’re not able to stop it completely.

Baine said to plug the anti-smuggling leakages the racketeers have been exploiting, RRA has asked the Treasury to buy speed boats that will be used to patrol Lake Kivu.

But her worry is that the procurement process is slow. The country may not have the boats soon. Procurement has to be tendered.

Other major challenges RRA faces besides smuggling is the continued rise of petroleum products on the world market. The tax body says skyrocketing oil products prices distorts projected revenue collection from the product.

Though statistics from RRA indicate that the consumption of petroleum products is annually increasing, the actual revenue collection the Treasury bags is actually less.

Whereas the country’s fuel imports stood at 102 billion litres in 2003, the volume has increased to 178 billion litres in 2007.

Between Frw15 billion and Frw18 billion is collected annually in taxes.

The increasing consumption of fuel, according to government is due in part to the booming economic activities and profitability of petroleum products business. The statistics also show that whereas 2,149 units of vehicles were imported in 2003, there was an increase to 4,474 last year.

The sector has remained profitable partly because Government cushions both dealers and consumers through heavy subsidies. Figures from Ministry of Commerce indicate that government subsidises on fuel are oscillating between 100 and 101 per cent, the highest in the region. This has kept the fuel in the country slightly cheap, left consumers happy but it has also made the fuel business very attractive.

If government was not subsidising on fuel, the prices would be three times higher, Baine once said while appearing on Contact Radio—Cross Fire, a city FM station talk-show.

Therefore RRA is not collecting any taxes at entry points on diesel and petrol. This means tax collection on this product is dwindling.

RRA challenges

The low level of tax compliance also remains a major problem to the tax authority. Baine said this problem cuts through the domestic taxes mainly because of wrong self assessments.

Tax payers are accused of making wrong self declarations. RRA is forced to audit the tax payers. Some provinces lack qualified accountants to assist in the preparation of books of accounts.

"About 60 percent of our revenue comes from audits." Baine said. Meaning if the tax payers are not audited then the country would be millions in false declarations.

It was cited that some staff in the tax body still have low skills in ICT which affects the capacity to deliver in time therefore.

Baine said despite the challenges the tax body’s revenue performance in the 1st quarter of 2008 was good. The total revenue target was Frw65 billion and the total revenue collected was about Frw70 billion, surpassing the target by 7.1 per cent.

Ends

 

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