MPs in the Lower Chamber of Parliament have started analysing a draft law on tax procedures, which would make electronic billing compulsory for all businesses among other changes.
Members of the House’s parliamentary standing Committee on National Budget and Patrimony started discussions on the bill on Wednesday, which is a review of the current law on tax procedures.
If passed as it is proposed, the amended law on tax procedures would make the use of electronic invoicing methods, such as the use of electronic billing machines (EBMs) among other uses, a legal requirement for all businesses except those exempted by the government.
Under article 15 of the proposed amendment, the use of electronic invoicing system (formerly known as Electronic Billing Machine) will be extended as an obligation to all businesses in the country, instead of those registered for value added tax (VAT) purposes.
Minister of State in charge of Economic Planing Dr. Claudine Uwera and RRA Commissioner General Pascal Bizimana Ruganintwali. / Jean-Chrétien Munezero
RRA Commissioner General, Pascal Ruganintwali, told the media shortly after meeting the MPs for the discussions that the move aims to maximise the body’s ability to collect taxes.
“We want everyone to be using the technology. It will help us to expand the tax base,” he said in an interview.
Article 15 of the proposed amendment to the tax procedure law stipulates that “a person who carries out any taxable activity must issue an invoice generated by an electronic invoicing system certified by the Tax administration”.
It also states that an order of the Minister will determine the modalities and conditions to be fulfilled in the use of electronic invoicing system as well as persons who won’t be required to use such a system.
Ruganintwali said that some businesses may remain exempted to use the electronic invoicing system given the nature of their transactions, singling out oil pumping stations as an example among others.
For the first time, the proposed amendment has also recommended a number of sanctions for businesses that will fail to comply with the legal requirement of using electronic billing means.
Article 79 of the amendment introduces administrative fines to persons who will fail to issue an electronic invoice while conducting transactions.
It states that except for taxpayers registered for the value added tax, any person who is required to issue an invoice generated by an electronic invoicing system recognised by the Tax administration who fails to do so is liable to an administrative fine of two times the value of the transaction.
The article also states that “a person who fails to comply with modalities and conditions for the use of electronic invoicing system is liable to an administrative fine of Rwf 200,000.
The proposed review states that any persons who will carry out a taxable transaction and deliver an electronic invoice with under-valued price or quantity of goods or services will be liable to an administrative fine of two times the value of the under-valued transaction.
In case the above mentioned offences are repeated, the proposal says, offenders will be slapped with the stated penalties multiplied by two times.
The chairperson of the parliamentary standing Committee on National Budget and Patrimony, Omar Munyaneza, said that about two weeks and a half will be used to examine the proposed amendments to the tax procedure law.
Regarding the compulsory use of electronic billing, he said that the obligation will most likely start with already established businesses while beginners who own small shops normally have two years of trial without paying taxes.
“We want to make sure that no articles in this law are seen as a challenge for taxpayers because they are the ones who pay the taxes,” he said.
Overall, he supports the proposed mechanism because it is both helpful for business owners and for tax administration purposes.
“We are at a time when technology is being used a lot in Rwanda. It is believed that the use of electronic billing will help to easily collect taxes and help business owners easily follow up on their transactions,” he said in an interview.
RRA officials have argued that the current tax law which says that only VAT-registered taxpayers are required to use EBMs for their transactions is not fair enough for purposes of tax administration.
They say that the formula has proven unfair for taxpayers whose businesses are routinely monitored by RRA because they are connected to the electronic billing system while those not using EBMs are not monitored.
The result is that RRA has found it difficult to determine if non VAT registered taxpayers have reached the required turnover of at least Rwf20 million per year in order for them to qualify for VAT payment and use EBMs.