Domestic revenue and taxpayer compliance at the center of 2025/26 budget

Rwanda’s national budget for the fiscal year 2025/26 has been set at Rwf 7,032.5 billion, reflecting a significant increase of 20.9 per cent compared to the revised budget of Rwf5,816.4 billion for 2024/25. This year’s budget underlines the country’s growing fiscal independence, as most of the financing will be sourced from domestic revenue, with tax collections taking center stage. Domestic revenues are projected to contribute Rwf4,105.2 billion, representing approximately 58 per cent of the total budget. Tax revenue, which remains the primary engine of domestic financing, is forecast at Rwf3,628 billion, an increase of Rwf677.6 billion over the previous fiscal year. This growth is driven by Rwanda’s expanding economy, continued reform efforts, and the implementation of new tax policy measures under the government’s medium-term revenue mobilisation strategy. Non-tax revenues are projected at Rwf477.2 billion, derived largely from administrative fees, charges, and proceeds from various government services. External resources will complement these domestic efforts, with grants projected at Rwf585.2 billion and loans at Rwf2,151.9 billion. The increase in external borrowing will primarily fund strategic infrastructure projects, including the second phase of Bugesera International Airport and the expansion of RwandAir, which are expected to boost Rwanda’s competitiveness and regional connectivity. To meet these ambitious domestic revenue targets, the Rwanda Revenue Authority (RRA) is expected to implement several strategic measures. The tax administration will intensify audits, risk assessments, desk audits, and field inspections to ensure full and accurate taxpayer compliance. Enhanced digital platforms such as e-filing, electronic billing machines (EBM), and real-time data reporting will simplify compliance while closing loopholes that lead to under-declaration. RRA will continue its efforts to formalise the informal sector, which currently accounts for approximately 80 per cent of the economy, to broaden the tax base and ensure that all economically active businesses contribute fairly to national development. Comprehensive public education campaigns remain crucial to promoting voluntary compliance and raising awareness of taxpayer obligations. Taxpayers should not claim ignorance of their responsibilities. It is advisable that RRA partners with audit and advisory firms to strengthen taxpayer education. Given recent changes in tax laws, there is a risk of confusion if these reforms are not well explained and properly communicated. I recall that in 2001, when VAT was introduced in Rwanda, one of the main challenges was that many taxpayers were unfamiliar with it, having previously dealt with the ICHA tax. With proper education, VAT eventually became one of the largest contributors to Rwanda’s revenue base. Customs operations will also leverage advanced technology and data analytics to enhance efficiency, revenue collection, and compliance at Rwanda’s borders, even though international trade taxes continue to decline due to regional integration and expanded exemption regimes. The 2025/26 budget puts taxpayers at the core of Rwanda’s fiscal sustainability. As domestic revenue becomes increasingly essential, taxpayers — both individuals and businesses — will be expected to demonstrate higher levels of compliance, transparency, and timely payment of taxes. Audit activity will increase as RRA strengthens its enforcement capabilities. Digital tax administration is expanding, bringing with it additional reporting obligations. Businesses, in particular, must maintain proper records and issue accurate invoices. Multinational companies are also required to comply fully with Rwanda’s transfer pricing regulations by documenting all transactions with related parties. At the same time, taxpayers will benefit from improved support services, simplified processes, and prompt assistance as RRA modernizes its operations. Today, unlike in previous years, taxpayers who contact RRA receive immediate responses, a notable achievement for both RRA and the Ministry of Finance. However, non-compliance will be met with stricter penalties, which can go as high as 70 per cent of the principal tax due for certain offenses. Taxpayers who meet their obligations will enjoy a stable, efficient, and increasingly modern tax administration system. The government’s approach emphasizes partnership, where taxpayers contribute responsibly while the state delivers improved services, infrastructure, and economic opportunity. The 2025/26 budget reinforces Rwanda’s determination to build long-term fiscal resilience and reduce dependency on external assistance. Through domestic resource mobilization and a strong culture of tax compliance, Rwanda is laying a solid foundation for sustainable growth, job creation, and inclusive development. This budget is not merely about fiscal figures; it reflects a collective commitment among government, businesses, and citizens to secure Rwanda’s economic future. The author is a Tax and Regulatory Partner at Garnet Partners Limited, a firm providing tax, audit, and advisory services. He is a former KPMG Tax Expert with extensive experience in the East African region.

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Domestic revenue and taxpayer compliance at the center of 2025/26 budget