Government to increase domestic revenue targets to Rwf476 billion

The government targets to collect revenue domestically to a tune of Rwf 479billion or (13.6 percent of GDP) in 2010/2011 financial year to cater for the increased government spending. Last year the target was Rwf385 billion (12.2 percent of GDP) according to figures presented do budget day. In 2010-11, tax revenue will contribute Rwf 457 billion while non tax revenue will yield Rwf 22 billion. Specifically regarding tax revenue collections, direct taxes are expected to contribute Rwf 179 billion, taxes on goods and services will yield Rwf 238 billion while taxes on international trade will bring in Rwf 41 billion. In his budget speech on Thursday, John Rwangombwa, the Finance Minister announced an increase of 9 percent of government spending to boost economic growth. “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 tax administration measures,” Rwangobwa told parliament. Currently about 75percent of tax revenues comes from consumption taxes (excise duties and VAT) and Pay As You Earn (PAYE). Government also intends to improve efficiency in tax administration including having Rwanda Revenue Authority (RRA) fully automate district offices in Kigali City and provinces by March 2011. In addition, RRA has been authorized to collect contributions to Caisse Sociale and RAMA on behalf of the institutions. “This measure will reduce the burden of compliance for taxpayers as they will queue only once to fulfill their various obligations; Rwangombwa explained. The minister also said this will help RRA to broaden its tax base by bringing into the tax net potential taxpayers who make their social security and health insurance contributions but do not pay their taxes. Total receipts from exports are projected to increase from US$ 193 million in 2009 to US$ 240 million in 2010 and to US$ 360.7 million by 2013. The recovery of the minerals sector is also expected to boost revenue with total earnings from the sector projected to rise from US$ 55 million in 2009 to US$ 63 million in 2010. But the Finance minister did not announce far-reaching tax reforms, despite repetitive demands from the private sector for some tax reforms including the removal of Value Added Tax (VAT) on insurance premiums, remove VAT on Gas (LPG) and changing the current tax system to a flat rate tax system. Apart from removal of VAT on petroleum products, there other tax policy reform that was announced is change of fuel tax system from the current ad valorem to a specific tax of Rwf250 per litre of diesel and Rwf 283 for petrol.The only new tax increment announced was on airtime rising from 5 to 8 percent in excise duty. Ends