The Private Sector Federation (PSF) has appealed to the Government to ease pressure on taxpayers by applying flexible penalties to its members who delay to declare their taxes.
The PSF position was tabled in parliament yesterday as it lobbied the members of the parliamentary Standing Committee on Budget to adopt the stance in the draft law on taxation.
The umbrella arm of the business community says that relaxing tax penalties would continue to support business growth – necessary for the country to achieve the middle income status it aspires for.
Deus Kayitakirwa, PSF Director of Advocacy, said that the penalties imposed on taxpayers for their delay to declare their taxes had the potential to cripple businesses which have demonstrated the potential to grow.
According to the law, a small taxpayer is promptly fined Rwf100,000, a medium taxpayer is fined Rfw300,000 and a large taxpayer Rfw500,000 for late declaration.
On top of this, the taxpayer will also be fined for late payment and will be required to interest on the original tax he owed.
Kayitakirwa told the MPs that while his institution believes in the need for penalties, heavy sanctions pose a threat to taxpayers and potential investors.
“Let there be one penalty that can be agreed on by both the tax body and the taxpayer but imposing three penalties for one mistake is too much. While penalties cannot be scrapped, we feel that they should be lessened so that penalties do not take people out of business,” he said.
About the fine
Besides failure to declare taxes, the penalties for late payment are fixed for all the three categories of taxpayers but the period differs.
“If you voluntarily declare, the administrative fine is 10 per cent if you have not gone beyond 30 days, 20 per cent if you exceed 30 days but not more than 60 days and 30 per cent if you go beyond 31 days,” he explained.
However, Kayitakirwa explained that if you do not declare and are audited by Rwanda Revenue Authority, you are fined 20 per cent if you exceed 30 days but not more than 60 days and 40 per cent if you go beyond 31 days, 60 per cent if you go beyond 31 days.
He pointed out that while slashing the penalties from 60 per cent to 40 per cent was commendable in the past, bringing it down to 30 per cent would be more helpful.
“We spend a lot of time reviewing dossiers of people who have failed to pay not because they can’t afford the tax, but because the penalties are many. Penalties have been waived before, to allow businesses continue to run. We should aim at teaching not penalising,” he said.
The president of the standing committee, Omar Munyaneza, called on PSF to put more effort into sensitising their members about government incentives aimed at easing pressure on businesses.
“There have been some adjustments. At least now someone is allowed to pay in instalments for a period of two years instead of 12 months. I think one of the most important duties you have as an institution is to educate the taxpayers of such changes so that they don’t find themselves drowning in penalties,” he said.
MP Spéciose Ayinkamiye called on PSF to engage its members more before such consultations since most continue to feel left out.
“Business people, especially outside Kigali City feel left out. They have on several occasions complained of not being consulted and decisions being made for them without their input. You need to consult them more,” she said.
The discussions on the draft law continue today with the appearance of civil society.