The draft law on investment promotions and facilitation should be approved and gazetted by the end of March, MP Connie Bwiza, the chairperson of the parliamentary Committee on Economy and Trade, has said.
The Investment Code Bill, which was passed by Parliament, last week, replaces the existing legislation, which has existed since 2005.
The current law is faulted for not adequately catering for the country’s strategic sectors.
The Investment Code is expected to limit incentives to investors in priority sectors as opposed to the current blanket regime.
The priority sectors include energy, ICT, transport and logistics, improved agriculture, tourism, manufacturing, business process outsourcing and real estate.
“I am sure it will be operationalised soon because it is urgent and important to our investors. That’s why the Parliament gave it priority to put the (Investment) situation right,” Bwiza, who was speaking to The New Times, yesterday, added.
Investors are keenly awaiting the new code, which the government officials say was conceived in a bid to avail incentives to help shore up investments in priority sectors.
The legislation will particularly provide for a 50 per cent reduction in preferential corporate tax for investments in the priority sector – up from the current 30 per cent.
The new law will also provide clearly defined tax holidays of up to seven years depending on which sector one has invested in and how much is involved.
The existing law has been blamed for not having clearly specified incentives, creating market distortion and also not generating expected investments while favouring traditional exports.
In a recent interview with The New Times, Louise Kanyonga, from Rwanda Development Board (RDB), said government was not out to extend incentives to just anyone but rather focusing on sectors that are critical to making the country a private sector-led economy by 2020.
“We are trying to put more focus on what we consider as strategic investments that are linked to our targets that will help us fast track our development,” she said.
Antoine Manzi, the director of advocacy at the Private Sector Federation, said considering contribution of key sectors like energy, mining and construction was vital at expanding their investment base in the country.
“Sectors like mining and construction incurred huge losses due to policies that are not favorable enough such as long term financing and taxation, yet they are considered big GDP contributors in the country. We are optimistic that the new law would address such issues,” he said.
Article 15 of the draft code mandates RDB to facilitate the provision of fiscal and non-fiscal incentives to investors and aftercare services to investors from the time of registration to operational stage, among others.
Currently, Rwanda faces challenges with balance of trade, importing far more than the exports. The new law will seek to promote exports instead.
“We are very sure that such investments will increase once the new law is enacted,” said MP Bwiza.
Rwanda is regarded as one of the most generous countries for investors with figures indicating that the government was probably losing billions in tax holidays.
A report, released in 2011 by the Institute of Policy Analysis and Research and ActionAid International, indicates that in 2008 and 2009, the country lost over $234 million in tax incentives.
With the new law in place, the trend is expected to be reversed, while creating more employment opportunities, increasing VAT, PIT collections and as a ripple effect increase government revenue collection and economic growth.Follow https://twitter.com/AthanTashobya