The Private Sector Federation (PSF) has welcomed amendment of the law governing Value Added Tax (VAT) which provides for lesser penalties for non-compliance.
Lawmakers adopted the proposed amendments on Tuesday, following public outcry over penalties related to failure or non-compliance with usage of Electronic billing machines (EBMs).
The draft legislation will now head to the Office of the President for assent.
The amendments were scrutinised by the committee in charge of national budget and patrimony.
The legislation seeks to lessen administrative fines extended to business people, especially for small taxpayers, and adopt new lists of goods meant for tax exemptions as government intensifies campaign for Made-in-Rwanda products.
Under the existing law, failure to use EBM effectively attracted administrative fines varying between Rwf500,000 and Rwf20m.
But under its article 3 of the amended legislation, the fine should be 10 times the value of the evaded value added tax.
“In case a person repeats the fault specified in paragraph 1 of this Article, he/she is liable to an administrative fine of 20 times the value of the evaded value added tax,” reads part of the adopted law.
Talking to The New Times, on Wednesday, Benjamin Gasamagera, the chairperson of PSF, said the amendments are significant for small and medium enterprises whose businesses faced risks of dissolution as a result of heavy penalties.
“We are happy because we took the lead to propose the changes simply because you could not penalise a person at the tune of Rwf200,000 for a simple invoice mistake of around Rwf5000 to Rwf10,000,” he said.
The new legislation provides for a fine of ten times the value of the evaded value added tax for any person who makes a taxable transaction and delivers an electronic invoice with under-valued price or quantity of goods or services.
Gasamagera, however, stated that fines would still bear a heavy toll on large business entrepreneurs who normally trade in big sums and would incur incredible losses upon a minor miscalculation.
“You imagine a situation where a cashier makes a mistake of invoice of goods estimated at Rwf100m and is supposed to be fined 10 to 20 times of the same amount,” he added.
However, MP Theobald Mporanyi, a member of the committee that scrutinised the draft law, stated that the proposed amendments were treated in the interests of members of the public but also bearing in mind the work of the tax body in achieving given tax targets.
“I tend not to agree with harsh penalties for large entrepreneurs because very often finance managers commit errors on invoices unknowingly. But depending on the nature of the mistake, the same law provides room for negotiations with Rwanda Revenue Authority,” Mporanyi said.
By the end of last year, there were only 9,966 VAT-registered taxpayers using EBMs, a figure that is likely to almost double if informal sector VAT eligible businesses start using the machines.
This is expected to help the tax body to meet its tax collection targets.
An EBM costs between Rwf230,000 to Rwf380,000, depending on the model, having reduced from Rwf400, 000 and Rwf450,000 at the initial introduction of the machines on the market.