Budget: VAT on Fuel scrapped

Taxes on mobile phones scrapped Rwanda Revenue Authority (RRA) will shift from using the ad-valorem tax system on fuel to specific tax in order to align with other East African Community (EAC) member states in the new financial year according to 2010/11 budget that was presented to parliament yesterday.

Taxes on mobile phones scrapped

Rwanda Revenue Authority (RRA) will shift from using the ad-valorem tax system on fuel to specific tax in order to align with other East African Community (EAC) member states in the new financial year according to 2010/11 budget that was presented to parliament yesterday.

While the move will see government reduce tax subsidies on fuel, it will at the same time remove Value Added Tax (VAT) on petroleum products.

According to the minister, the government also scrapped VAT on petroleum products recommending a flat tax fee of Rfw 250 to be paid per litre of diesel and Rfw 283 per litre of petrol.

Currently the government subsidy on both petrol and diesel stands at 55 percent and 63 percent, respectively.

“We are changing the excise duties to specific taxes; when you put it in terms of percentages, it is reducing from 76 percent to 64 percent on diesel while on petrol; it is reducing from76 percent to 75,” Finance Minister John Rwangombwa told The New Times yesterday after presenting the new budget.

Under the current ad-valorem system, fuel is taxed basing on the market value whereas the specific system puts a fee in place.

The new tax system is also expected to keep local prices stable as opposed to current regime that allows influence of international prices.

Despite a firm subsidization strategy, recently due to mounting pressure from a volatile global oil market, pump prices increased by two percent.  

Specifically, prices of both petrol and diesel increased from Rwf 918 to Rwf 940 per litre, an increment that was attributed to the sharp price increases on the world market since February that saw a barrel of crude oil increase from $70 to $89.

The government says that the new tax method guarantees revenue per litre sold, which is independent of the price of international oil.

As a result, it is projected that the revenues from fuel will remain stable as the increase in taxation (reduction in implicit subsidy) will offset the effect of lower international prices.

Meanwhile, the minister announced the scrapping of taxes on mobile phones and SIM cards is a move aimed at easing communication within the country.

Rwangombwa however said that though the government was keen on promoting communication in all the corners of the country, the taxes on airtime would increase from the current 5% to 8%, saying that the new tariffs will come into effect in January next year.

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