In due course, President Paul Kagame is expected to assent to the Value Added Tax (VAT) Bill, which was passed by Parliament on Tuesday. In passing the Bill that introduces a plethora of incentives, legislators attached special emphasis on the use of electronic billing machines in an effort to help seal loopholes in tax collection and boost revenues.
The draft law expands the list of goods and services deemed critical to economic development that will be exempted or zero-rated from VAT.
With the special provisions that reinforce ministerial powers to fine taxpayers who circumvent using electronic billing machines to avoid paying taxes, this draft law, once gazetted, will be a sure step toward improving the efficiency of Rwanda Revenue Authority’s VAT administration, a tax component that contributes about 35 per cent of total domestic revenues collected.
Last year, this newspaper went undercover and exposed several methods unscrupulous traders were using to defraud the economy of billions of francs in tax evasion.
But with provisions that stress punishments for culprits evading taxes by not using electronic billing machines or by other methods, the whip will serve the common good.
On the other hand, investors are all smiles as, among others, the amended law puts zero tax on exported goods and services, minerals sold on the local market and international transportation services of goods entering the country and those in transit via Rwanda to other countries.
Health and medical services and equipment, energy supply, charity goods, agricultural inputs, livestock materials and equipment, educational materials, ICT equipment, among others, will be exempted from VAT.
VAT will also be refunded if, during a particular prescribed taxation period, the input tax exceeds output tax, within 15 days, unlike the previous 30 days.
It is not every day that you get a tax law that provides a win-win base for consumers, traders, investors as well as the government in a single package, but government seems to have pulled a master stroke on this.
The onus now is on us to encourage investors to make good of the law as traders do their part to ensure revenue collectors no longer run themselves course running after taxes. Let’s make this new tax law work for all once it comes into force.