Despite an increase of about Rwf140.7 billion for national spending as outlined in the 2017/18 Budget, the Government has chosen not to impose additional taxes but tighten revenue collection measures.
This, Rwanda Revenue Authority (RRA) says, will significantly contribute to the Rwf2 trillion National Budget that will be domestically financed at 66 per cent, up from 62 per cent last year.
This ambition, in turn, means that RRA will have to step up tax collection efficiency to ensure tax compliance.
According to RRA Commissioner-General Richard Tusabe, among the avenues will be widening the tax base through public sensitisation campaigns.
“We want to ensure that we do not overburden compliant taxpayers. In terms of widening the tax base, we are going to continue with sensitisation, not through a one-size-fits-all approach. We performed a risk differentiation and have come up with a ranking of the sectors in terms of tax compliance. We will undertake comprehensive education as per the tax compliance levels,” he said.
This sensitisation will also ensure that tools such as electronic billing machines (EBMs) are put to proper use and that the general public is aware of their role in boosting tax compliance.
With about 16,000 EBMs deployed currently, RRA is exploring prospects of introducing a version that is applicable with the e-Environment that the country is embarking on as part of the cashless economy.
The tax body is also looking to introduce an application that can be used in place of the physical gadgets, thereby cutting the cost incurred in rolling out the machines and increase compliance.
“We will add about 10,000 machines this fiscal year, especially for the risky sectors. It will not be a one-size-fits-all machine. It will be tailored in terms of complexity and the nature of their operations,” Tusabe said.
“Mindful that the cost of an EBM is a bit high, we would like to introduce an app that one can download and use it as an EBM as opposed to focusing on use of a certain gadget.”
The tax collectors are also introducing new measures to check fraudulent activities, among others, by implementing supply chain management systems to reconcile the sales and stocks.
This will reduce the chances of fraud for people who had learnt to manipulate the systems with some businesses attempting to evade taxes by under declaring prices of items on EBM receipts.
“If you look at the EBMs being used, they focus on the point of sale. That has given an opportunity for people who do not want to comply to manipulate the prices. This time we are going back to the supply chain to control stock management. Once you clear your products at customs, the products will be followed from stock and reconciled with your point of sale,” Tusabe said.
Last year, officials at the RRA thwarted attempts by some unscrupulous individuals to defraud the Government of billions of francs by using EBM invoices to claim VAT inputs on fictitious sales.
Tracking down defaulters
The tax efficiency measure will also see RRA follow up on traders who have not been filing taxes despite being registered. About 20 per cent of RRA base has been filing nil, causing questions on the possibilities of tax evasion.
Through partnerships, RRA intends to collect and use information from agencies and utility companies such as Water and Sanitation Corporation, City of Kigali and EUCL to develop big data capabilities. This will help them reconcile data on taxes and bills paid for efficiency.
The partnerships could see tax defaulters unable to access some services until they have cleared arrears.
“We are also going to implement Geographical Information Systems to improve mapping which will enable us improve, collection of local government taxes. We will be able to see which Unique Parcel Identifier has paid taxes and which one has not. It will be easier than walking door-to-door checking who has paid,” Tusabe added.
With most of the measures requiring improvement of skills capabilities of their staff, RRA is working with institutions such as Carnegie Mellon University of Rwanda to bridge skills gaps.
Earlier this year, RRA launched the Regional Electronic Cargo Tracking System, which will help to seal loopholes that lead to revenue losses through tax evasion.
Experts on Budget
Tax experts say the move by the Government not to raise taxes will see more concentration of tax collection efficiency.
Speaking at a Budget analysis session on Thursday, Angelo Musinguzi, a tax manager at KPMG, said the measures are meant to expand the tax base without overburdening those previously in the tax bracket.
He noted that this will also see capacity building among the organisation’s staff to achieve the desired goals.
The new National Budget is the last before the lapse of the second Economic Development and Poverty Reduction Strategy (EDPRS II) implementation period.
The Government says they had this in mind and allocated adequate resources and support to the areas that are lagging behind.
The Permanent Secretary at the Ministry of Finance and Economic Planning, Caleb Rwamuganza, said the country is at about 86 per cent toward targets.
The aspect lagging behind most is energy generation and transmission, where the target was 563 megawatts by next year and at least 70 per cent of national households connected to power.
Currently, REG has a generation capacity of 208 megawatts, which is less than half of the target, while the connection rate is currently at about 32 per cent.
“We have reached at about 86 per cent towards the targets, the fiscal year beginning is the last one for implementation of EDPRS II. The focus in allocation of resources was on areas where we are still lagging behind such as energy generation where we are about half way there,” Rwamuganza said, adding that this explains tax exemptions for equipment used in solar energy.