A new law that seeks to make the use of electronic billing machines (EBMs) mandatory for every business in the country to end unfair competition among traders is being drafted, an official in charge of EBMs at the Rwanda Revenue Authority (RRA) has revealed.
In a recent interview with The New Times, Emmy Mbera, the EBMs project coordinator at RRA, said using EBMs will soon stop being the obligation of value added tax (VAT) payers only.
While the current tax law says that only VAT-registered taxpayers are required to use EBMs for their transactions, the formula is proving unfair for taxpayers whose businesses are routinely monitored by RRA because they are connected to the electronic billing system, while those not using EBMs are not monitored.
The result is that RRA has found it difficult to determine if non VAT registered taxpayers have reached the required turnover of at least Rwf20 million per year in order for them to qualify for VAT payment and use EBMs.
That situation has discouraged VAT payers who use EBMs because they have to pay taxes on every item they sell while businesses that are not VAT-registered exploit the loopholes in the system to make exorbitant profits by hiding their transactions and there is no way the revenue body can easily find out if they are qualified to pay VAT or not.
Officials hope that the law in the pipeline will boost the use of the machines once it is enacted
“During the monitoring and enforcement of EBM usage, price distortion and unfair competition were observed between VAT-registered taxpayers and non-VAT-registered taxpayers, hence leading to non-compliance of EBM users in order to remain competitive on the market. That’s why the Government of Rwanda wants all businesses to use EBM regardless of whether they are VAT registered or not,” Mbera said.
He said, by making the use of EBM mandatory, the revenue body will be able to monitor most businesses and sign up those that reach the Rwf20-million annual turnover to the VAT payment.
On top of paying income tax, VAT-registered taxpayers are required to collect the VAT that customers pay on items sold and hand it over to the RRA.
Without the revenue body monitoring them, some traders can lie about their sales to avoid paying the VAT on every product they sell, which is why it is critical for revenue collection for RRA to monitor traders.
And, it looks like the only best way to do it at the moment is if traders can diligently use EBMs.
“There is a draft law to amend the law that governs tax procedures, which will require all businesses to use EBMs regardless of whether they are VAT-registered. That way, RRA will be able to monitor and determine every business’s revenues. Once the law is in place, RRA will facilitate all businesses to comply with the use of EBM,” Mbera explained.
Since the use of EBMs started in the country in 2013, officials at the RRA have noted improved compliance in paying VAT on the part of traders, officials said.
Out of the Rwf1,071 billion that RRA targets to collect for the current 2016/17 fiscal year, Rwf229 billion (about 22 per cent) will be collected using EBMs.