Rwanda Revenue Authority (RRA) says it’s on course to collect Rwf906.8 billion needed to finance 52 per cent of current National Budget of Rwf1.75 trillion, despite some challenges that are undermining domestic tax revenue.
The tax body collected Rwf411.5 billion during the first semester (July-December 2014) of the current financial year, slightly lower than the Rwf432.7 billion target.
RRA Commissioner-General Richard Tusabe, briefing the media yesterday, said the performance (a 95.1 per cent success rate) was “fairly good in both tax and non-tax revenues.”
Tax revenue grew by 13 per cent compared to the same period in the last financial year bringing to the national treasury Rwf406.3 billion during the period, but lower than the targeted Rwf427.9 billion.
Non-tax revenue, according to Tusabe, hit above target topping Rwf5.2 billion compared to the Rwf4.8 billion target.
RRA cited slower than expected growth in consumption of taxable goods, decline in importation of some goods with a big impact of tax revenue; as well as reduction in the rate of growth in the value of supplies that attract VAT—the single biggest contributor to tax revenue—as some of the factors that hurt revenue.
“There was less than expected growth in consumption of some excisable products, especially beer and fuel. In July-December 2014, taxable quantities of locally manufactured beer grew by 7.9 per cent when compared to July-December 2013.
Fuel consumption increased by only 2 per cent which was way below the increase of 15.7 percent and 12.4 per cent registered in 2013 and 2012, respectively,” RRA said in a statement issued after the media briefing.
Tusabe said that since the 2013 slowdown that saw the economy grow at only 4.6 percent as compared to the previous average of 8 percent, local companies have reported lower profits which has had a negative impacted on the profit taxes.
Broadening tax base
To work around the challenges and achieve revenue collection target, RRA has outlined several measures aimed at broadening the tax base by bringing on board those individuals and organisations still outside the tax net.
Tusabe said that RRA will work with institutions such as Rwanda Cooperatives Agency, Rwanda Governance Board, Immigration Department, the Private Sector Federation, districts and the Ministry of Trade and Industry to register all individuals and businesses currently not in the tax register.
They include employees of local and international NGOs; businesses such as quarries and maize millers. Owners of commercial buildings will be registered for VAT while Pay As You Earn (PAYE) and VAT remittances by construction companies will henceforth be enforced.
RRA also plans to start a thorough audit of Government institutions to ensure they are compliant with PAYE, VAT and withholding tax.
“One hundred forty-five government institutions have already been given audit notifications and from October 2014 audits are being done by six teams of two people each for two months,” the tax body said.
Other measures include enhanced tax administration such as close monitoring of electronic billing machines usage and strict enforcement of payment of tax arrears.
A team has been put in place, including tax auditors, to perform the task since December 2014.
“Preliminary results from this exercise already look promising,” RRA said.
Tusabe said RRA will also continue sensitising taxpayers and the general public on tax matters to improve compliance.
Efforts to broaden the tax base have already seen the number of registered tax payers grow by 12 per cent during the period, from about 106,000 to about 119,000.
Angello Musinguzi, a taxation consultant with an international firm, KPMG, said RRA also needed to focus on income taxes and putting in place the rules and documentation regarding transfer pricing.
A transfer price is the price at which divisions of a company transact with each other, usually involving multinational corporations operating in the country.
“Kenya, Uganda and Tanzania have different transfer pricing rules which impacts on the corporate income tax collections. If it is not enforced, companies will continue reporting lower incomes,” Musinguzi said.
He added that since RRA had streamlined most of its operations, what remained is bringing more people into VAT network through the use of electronic billing machines and tax education and campaigns.