Tax incentives: a debate that should be devoid of sentiments

Editor, RE: “Is Rwanda giving too much in tax incentives?” (The New Times, June 8). Great piece; this is a good initiative by the civil society. There has been a lot of work done to improve the investment climate in the country and it’s probably time to cut on the tax exemptions. A number of reports, which I do not see quoted in this piece, have shown that a lot of revenue is being lost in the name of incentives.The security, business facilitation, zero tolerance to corruption, ICT systems, access to the region are already a jackpot for most of the multinationals. The civil society is now actively involved in sustainable development by conducting such studies. Ed **************************** Allow me to disagree with your comments for the following reasons. 1. Cost of doing business is more than security and business facilitation. In Rwanda, factors of production (electricity, land, transport, labour, etc.) are way very expensive compared to other countries. In order to make Rwanda an attractive investment destination, reducing cost of doing business must be a priority. 2. Which revenues do you consider lost? An investment is different from a running business. You need to understand that the tax base need to be expanded. It can only be expanded if new investments are registered. 3. Is advocacy part of sustainable development? I doubt. If this was the case, then I would suggest, that these international NGO build capacity of local NGOs instead of undermining local efforts in the name of advocacy. Build the capacity of local actors, so that they are able to impact their society. Finally, these types of articles only create in the mind of the readers that Rwanda is providing huge benefits to multinationals, instead of building the capacity of local investors. This is total falsehood because it does not reflect the reality. I could expand on this, but this would require a full article. David **************************** The new investment code offers incentives based on the performance by the investor in priority areas that will diversify the economy. So there is no such thing as loss because the investor, first, has to perform their part in order to get incentives. Further, they are investing in new areas, thereby increasing tax base. If there is no new investment, then there will be no taxes payable in the first place, hence no loss of what wasn’t there. By contrast, giving incentives is good strategy to diversify tax base, which brings indirect taxes like VAT/Withholding Tax, on what they purchase and use to run their businesses, and even PAYE for their employees. Incentives, though sentimental for many, if tactfully implemented, can help reduce cost of doing business as cited by David. Ms.Lindson

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Tax incentives: a debate that should be devoid of sentiments