Govt considers tax incentives for cashless payments

POS devices. The value of transaction through POS devices in the first six months of 2019 stood at Rwf100 billion. File.

Rwandan businesses that declare a significant portion of their revenue via cashless avenues could soon start receiving tax refunds.

The Government, through the Ministry of Finance and Economic Planning, is currently conducting studies to determine the feasibility of the concept.


Eric Rwigamba, the Director-General of the Financial Sector Development at the Ministry of Finance and Economic Planning, told The New Times the findings of the feasibility will be out by the first quarter of 2020.


This is an intervention seeking to drive the uptake of cashless economy in Rwanda.


Currently, Central Bank data indicates that the value of e-payments to Gross Domestic Product stands at 34.6 per cent from about 0.3 per cent in 2011.

The government targets is to drive the ratio to about 80 per cent by 2024.

Despite the progress, stakeholders say that there remain  challenges in the ecosystem, which hold back the uptake such as high costs of transactions, low confidence and trust by users as well as limited awareness.

Rwigamba said that among aspects that are being considered in the study is the impact on revenue collections against plans and projections, taxes that could be eligible for the incentive and modalities of implementation among others.  

Rwigamba said that considering that the country has targets and projections to grow revenue collection in a bid to improve self-financing hence the need to thoroughly evaluate the subject.

As opposed to solely looking at it as foregoing revenue collection, he said that if adequately implemented, it could have multiple positive effects such as improving tax payment compliance.

For instance, if applied on Value Added Tax, the development could improve compliance. The model could also be used to have other impacts on the economy such as boosting savings if adequately modelled to earmark a section of refunds for savings.

The model has been tested in countries such as India, where the government motivates uptake of cashless payments by giving tax rebates to businesses that declare about 50 per cent of their revenue via cashless payment options. 

What is holding back cashless progress?

Damien Ndizeye, the executive secretary of Rwanda Consumer Rights Protection Organisation (ADECOR) said that among the bottlenecks to uptake was little awareness of the need to take up cashless as well as limitations of outreach of cashless payments infrastructure across the country.

There are also concerns of high cost incurred by merchants using facilitating cashless payments. For instance, merchants told The New Times on average, the cost of POS transactions which is about 2.5 per cent of each transaction value was relatively high considering that they also incur costs to run the respective bank accounts.

The Chief Executive of MTN Rwanda, Mitwa Kaemba Ng’ambi, said that the relatively higher costs are largely because of low volumes of transactions and were set to go down as more people adopt the trend.

However, experts say that, regardless of the volumes needed to drive down the costs, maintenance of high cost without convenience could discourage uptake.

BPR’s Managing Director Maurice Toroitich, however, said that most players in the process of considering their business models to find ideal costs that are likely to ensure returns and at the same time relevance among clientele.

This could involve removing costs for smaller transactions to accommodate small and medium scale traders.

Toroitich, who is also the head of the Rwanda Bankers Association, admitted that banks and financial institutions could do better to improve user experience and convenience in cashless payments which will further drive uptake.

Central Bank Governor John Rwangombwa said that there has been progress over the years in the aspect and called on players to work on constant innovation and user experience.

“BNR and the other key stakeholders commit to working together to ensure security of payment systems, reduction in the chances of duplication by promoting interoperability, an increase in the number of places at which customers can transact electronically, and guarantee that systems are operating 24hours, seven days,” he said.

According to the Central Bank’s statistics, the number of transactions  through the Point of Sales devices stood at over 2.2 m as of June this year from about 1.5m transactions in June last year.

The value transacted over POS devices this year also rose significantly to stand at over Rwf100 billion in June 2019.

Among the major drivers for the drive was the introduction of new types of Point of sales devices which as of June this year stood at 14,000 and expected to grow in the course of the year.  The number of traditional point of sales rose of 3046 as of June this year.

Mobile financial services remain the largest driver of cashless payments with 2019 transactions as of June valued at Rwf2,058 billion with over 6 million transactions.

However, despite the increase in volumes and values of mobile financial services, further review of the data shows that a majority of it goes to airtime purchases, cash in and cash-out (Money transfers).

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