Total revenues generated by government rose by 22.58 percent in the first quarter of this year, boosting national coffers amid expectations of significant public spending cuts by many economies which are Rwanda’s development partners.
Cuts in national budgets of these countries that has been inspired by huge accumulated public debt could also affect negatively allocations to external aid from which Rwanda benefits.
Rwanda expects external aid in the form of grants to decline slightly from $804m in 2009 to $790m by 2013.
However, official statistics by the Central Bank suggest that from January to March this year government revenues and grants increased to Rwf162.66b from Rwf132.7b the same period last year, easing fears of constrained budgetary funding.
Revenues and total grants rising by 12.36 percent and 47.52percent respectively.
“During the first quarter 2010, the government did not maintain a prudent fiscal policy compared to the corresponding period of the previous year due to the high increase in total grants,” the Central Bank’s quarterly report on the state of the economy reads in part.
The report also notes that the overall fiscal deficit including grants improved from Rwf54.19 billions to Rwf33.91 billions.
“This overall deficit which is still very high was mainly due to the high government spending that increased from Rwf186.89 to Rwf196.57 billions in the first quarter 2010.”
Total domestic revenues also increased by 12.34percent from Rwf94.08 billions recorded last year to Rwf105.69.
Meanwhile tax revenues also maintained a positive trend, rising by 12.36 percent in the period under review.
“This reflects efforts made by the government to broaden the tax base where Rwanda Revenue Authority (RRA) has marked tax administrative reforms and collection mechanism,” the Central Bank says.
This year financial year (2010/2011) the country’s tax body targets were raised to a tune of Rwf479billion or 13.6 percent of GDP from Rwf385 billion last year.
In his budget speech in June, Finance Minister John Rwangombwa announced that with 75 percent of taxes and non- taxes collected by end April this year, government is on track to achieve domestic revenue targets for 2009-10.
“Higher collections of direct taxes and some indirect taxes offset shortfalls in international trade taxes and non tax revenues .Efforts have been placed to decentralize tax administrative services in order to broaden the tax base and to increase compliance,” Rwangombwa told Parliament.
As a result of various reforms undertaken by RRA in 2009 the Minister said, 1,257 new taxpayers were registered bringing the total number of taxpayers to 34,193 at end 2009.
“The domestic revenue targets though ambitious will be achieved as they are underpinned by our projected economic recovery in the coming fiscal year as well as RRA’s ongoing aggressive tax administration reforms,” Rwangombwa said.
In addition RRA was tasked to start collecting Social Security funds (Caisse Sociale) and health insurance premiums (RAMA) on behalf of the institutions.
Government argues that this will reduce the burden of compliance for taxpayers and also help RRA to broaden its tax base by bringing into the tax net potential taxpayers who make their contributions but do not pay their taxes.
Direct taxes increased by 35.40percent from Rwf31.43 billions to Rwf42.56 billions mainly due to the high increase in property tax collected from all registered vehicles.
Vehicles that came in 2009 had to triple their taxes while those that came in 2008 and 2007 had to double what they had been paying.
However, taxes on international trade dropped by 36.30percent, from Rwf13.53 billions to Rwf 8.62 billions.
“This was a result of the application of tax policies implemented by EAC customs union with effect from 1st July 2009, where the rate on finished goods and intermediate goods decreased,” the report says.
Non tax revenues which includes dividends from the Central Bank , other dividends from government parastatals, receipts from ID cards, driving licenses, and license fees from new registered companies increased by 11.83percent , from Rwf2.95 billions to Rwf 3.30 billions in the first quarter this year.