Rwanda Revenue Authority (RRA) has processed payment of Value Added Tax (VAT) refunds worth Rwf4.2 billion, Business Times has learnt.
The total VAT claims from September 2008 up to the second week of September 2009 amounted to Rwf2.2 billion for the privileged and exempted persons while for the business community had claims worth Rwf2.7 billion before audit.
After audit, RRA approved payment of tax refunds worth Rwf1.9 billion to exempted and privileged persons such as diplomats, projects funded by international organizations and Non Governmental Organizations, while Rwf2.3 billion went to a section of the business community.
“We have accumulated money to refund because we also retain 10 percent of the VAT payment specifically for VAT Refunds, however the problem is that most claims are either not accurate or do not meet the conditions,” Ben Kagarama, the Deputy Commissioner in charge of large tax payers said.
Kagarama also dismissed criticism from the business community that the tax body does not pay VAT returns on time, insisting that claims which take long to be processed are normally faulty.
“Most tax payers request for extension to provide justification for payment after audit. The issue is not the money to refund but the procedure to refund,” he said. He also pointed out that the tax body processes payment of VAT refunds before audit if it is below Rwf2 million for large tax payers while tax payers are expected to respond to the audit report within 15 days.
“To ease the process last year as administration we agreed to extend the threshold to 2 million outside the law to facilitate people to get money,” Karagama said.
Under the tax law automatic payment is allowed for VAT refund below Rwf500,000 however if a taxpayer requests for refund of more than Rwf 500,000, for more than three consecutive times, then RRA carries out an audit to verify the validity of refund request which is done in a period of three months.
In their position budget paper to parliament this year, the private sector lodged complaint that a colossal amount of business capital is held up in VAT refunds, constraining business cash flows and operations.
“We propose that government handles VAT refunds expeditiously to enable the smooth running of companies paying VAT to RRA,” the position paper reads in part.
However according to Kagarama, the VAT refunds have an accumulated account though the claims made usually do not meet the requirements while the business community tends to delay to respond to audit findings.
“This claim is unfair because most people delay to react to audit findings and instead request for more time,” he said.
Tax refund is a result of having taxes withheld on earnings that amount to more than what a person owes in income taxes for a calendar year.