Unregistered businesses are costing government over Frw1 billion of Value Added Tax (VAT) and income taxes, according the study.
The sensitization and recruitment campaign report study conducted last month by Rwanda Revenue Authority’s (RRA) department for domestic taxes, revealed that out of the 3,248 tax payers visited in Kigali city, 1,723 were not registered for VAT and income tax.
The study also revealed that some 394 tax payers visited were registered but do not submit tax returns to the authority.
The exercise which was aimed at widening the tax base and improving compliance shows that some businesses had existed for more than two years without paying taxes.
The report described the number of non-compliant taxpayers as “alarming”.
This is not the first time RRA discovers such heavy loses of tax defaulters this year.
In June Frw300 millions were discovered to have been lost since 2002. This was due to public accountants’ failure to collect withholding tax from consulting firms.
Revenue authority says most tax payers are ignorant about the difference between local authority levies and RRA taxes.
Most tax payers who clear local authority taxes sometimes assume they have cleared all due taxes and never minds to file any income tax returns to RRA.
Gerald Nkusi Mukubu, the Director for Tax Payer services explained: “Most of these tax payers are completely ignorant about the tax law.
He said, “They claimed to only be aware of the decentralized tax at the district which is paid when starting a business.”
Despite loss in fiscal revenues, Mukubu however said, about 90 per cent of RRA’s intended objectives have been achieved.
He added that before conducting the exercise, RRA had registered only 69 taxpayers, however after the numbers increased to 163.
The major objective of the exercise was to visit every business and to discuss with the owners some tax related issues as a way of educating them about their rights and obligations with regard to taxes.
Julius Kabagambe, a trader in Kicukiro told business times that he is not eligible to pay income tax because his business has not spent even one year in existence.
“I did not know much about RRA taxes until recently. To me there was no difference between local taxes and RRA taxes, but now I know and will fulfill my obligation,” said Mary Mukankusi, another trader.
In generally, majority of the tax payers visited were positive about the exercise because they were eager to know more about taxes and their obligation as taxpayers.
Despite the fact that the tax body has managed to beat her targets over the last ten years, non compliance remains one of the major challenges.
Therefore RRA plans to extend the exercise to other provinces of the country.
Mukubu said that after education of taxpayers, the next step will be enforcement of all the penalties that come with tax evasion, non filing and assessment.
Last year, the tax body also held the same sensitization and recruitment campaign but only on Value Added Tax and since they have proved to produce positive results, such will be carried out continuously until every trader has been registered.
Out of the campaign, the treasury managed to achieve its target of Frw252 billion mainly through the increased levels of compliance.
At the anniversary celebrations, Mary Baine, the RRA Commissioner General announced that the Authority has a target of collecting Frw275billion in taxes for 2008.
Should the target be met, internally generated revenue would fund more than half the country’s budget.
Increase in number of compliant taxpayers implies heavy contribution to the national treasury thus attaining national economic independence.