Fiscal incentives key to attracting investors

Having in place a transparent tax framework, fiscal incentives and robust infrastructure is key in attracting foreign direct investment, Rama Sithanen, the former Mauritian finance minister, has said.
Participants listen to presentations during the forum that attracted the services sector stakeholders and government officials. The New Times / Peterson Tumwebaze
Participants listen to presentations during the forum that attracted the services sector stakeholders and government officials. The New Times / Peterson Tumwebaze

Having in place a transparent tax framework, fiscal incentives and robust infrastructure is key in attracting foreign direct investment, Rama Sithanen, the former Mauritian finance minister, has said.

Sithanen said investors, including private equity financiers, first consider the transparency of a country’s tax policy before committing their money. He noted that Mauritius had succeeded in becoming a financial hub by signing double taxation treaties with other countries and scrapping value added tax (VAT) and capital gains tax on secondary markets.

“Rwanda needs to take advantage of its geography, stability, cleanliness, good governance and walk that extra mile to strengthen its brand in order to become a financial, ICT, transport and logistics, education, tourism and medical hub,” Sithanen said.

He was speaking during a two-day Services Investment Forum (SIF) organised by the Rwanda Development Board at the Kigali Serena Hotel on Monday.

He said there was need for a dynamic private sector to help identify the key sectors that drive growth. He added that it was crucial to invest in technology, infrastructure, human resources and strong financial institutions like the stock market.

He lauded Rwanda for being open for trade, investment and economic co-operation, saying that was important to attract ltalent, technology and other forms of capital.

Sithanen advised Rwanda to build a unique set of competitive advantages that would make her stand out and attract more investment.

“In Mauritius, we set a 15 per cent tax on the chargeable income of domestic companies across all the sectors of the economy to attract capital inflows into the country. For global businesses, they were entitled to either the tax credit of the higher tax suffered or 80 per cent of its chargeable income,” explained Sithanen.

He said Rwanda needed to strike a balance between not being perceived as a tax haven or where the taxes are too high.

“The attractive concessions included signing double taxation treaties with many countries.

“We also eliminated double taxation by providing tax credit equivalent to Mauritian tax, reducing withholding tax on dividends, interest and royalties, as well as exemption from capital gains tax and possible exemption on interest payments on loans,” Sithanen explained.

Minister of Finance Amb. Claver Gatete noted that the private sector was an important player in ensuring that the second phase of the Economic Development and Poverty Reduction Strategy succeeds and propels the country to a middle income economy by 2018.

Gatete explained that this was shown by how the country had attained high economic growth in the last 10 years, lifted over one million people out of poverty in the past year and controlled inflation to single digits.

“The world has confidence in Rwanda because of the conducive business environment, macro-economic stability and the country’s vision that is understood by everyone,” said Gatete.

He said the services sector contributes about 50 per cent to the economy, adding that it was a major source of jobs for Rwandans as investments in the sector continue to grow.

“Wholesale and retail trade is the largest sub-sector, worth over Rwf80b, and has been growing at 13.5 per cent per annum since 2006,” said Gatete.

The two-day Services Investment Forum (SIF) was the first of its kind and aimed at showcasing business opportunities in the sector.

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