MPs approve tax breaks on alcohol brewed using locally sourced materials

Members of the Chamber of Deputies on Wednesday approved the government’s proposal to reduce consumption tax on alcohol beverages brewed using locally sourced raw materials.

The MPs passed a draft law that Finance Minister, Uzziel Ndagijimana, presented to Parliament early this month, which reduces the consumption tax rate on beers and wines made using locally produced raw materials.

Once published in the Official Gazette, the approved law will lower duties levied on beers whose local raw material content, excluding water, is at least 70 per cent by weight of its constituents.

The excise tax on the beers will be set at 30 per cent, down from the 60 per cent rate.

The same will be will apply to wines.

The current consumption tax law, which was amended, doesn’t categorize the tax rate for wines or beers based on the origin of raw materials.

It puts the excise tax rate for beers at 60 per cent and wines at 70 per cent. These rates will be maintained for alcohol beverages brewed using imported raw materials.

Ndagijimana has said that the move is in line with the government’s policy to promote domestic investment and reduce imports.

“It will help spur domestic investment by giving Rwandan farmers a market,” he said early this month.

Ndagijimana has argued that once the amendments to the consumption tax law are published, big brewers in the country like SKOL and Bralirwa would be encouraged to decide to use cereal agricultural products already found in Rwanda and work more with farmers to massively produce them.

“It will help because brewers like SKOL and Bralirwa may decide to use cereals found in Rwanda like wheat and sorghum as a result of this law,” he said.

If that is done, it means that the breweries could buy a lot of raw materials from Rwanda and this may promote agriculture here because they may use a lot of locally-produced agricultural products for their raw materials, the minister has said.

He also explained that Rwandans stand to gain from the changes because money that was being spent on importing the raw materials will be spent in Rwanda.

“For cereal farmers, they may get market for their produce in the future as a result of this law because factories may change and use cereal products from Rwanda,” the minister said.

The New Times has learned that Rwanda Revenue Authority (RRA) consulted both SKOL and Bralirwa before the law was proposed to Parliament.

An excise or consumption tax is an indirect tax on the sale of a particular good or service such as fuel, tobacco and alcohol.

Indirect means that the tax is not directly paid by an individual consumer — instead, the revenue collection authority levies the tax on the producer or merchant, who passes it onto the consumer by including it in the product’s price.

In Rwanda, excise tax is currently levied on some imported and locally manufactured goods such as fruit juices, lemonade, Soda and other juices, mineral water, beers and wines, brandies, liquors and whisky, cigarettes, gas oil and premium, lubricants,  some vehicles, as well as powdered milk and telephone communications.

editor@newtimesrwanda.com