Fuel dealers across the country have hailed the government’s decision to cut fuel taxes in the 2011/2012 budget presented to parliament last Wednesday.
In the fiscal year 2011/2012, government will reduce fuel taxes by Rwf100 per litre for both petrol and gasoil to curb inflationary pressures.
While reading the budget in Parliament, the Minister of Finance, John Rwangombwa, noted that given that government has no influence on the direction of price movements of oil, one of the actions it can take to curb domestic pump price is through reduction of taxes.
Kobil Rwanda’s boss, Patrick Ngugi described the move as very positive to the country’s economy.
“Rwandan fuel levies were almost more than double compared to other East African member states. This is quite welcome and we are looking forward to these new tax rates,” Ngugi noted.
He added that they are looking forward to the implementation of the second phase of the reduction process, saying they expect pump prices to go down.
“After this, we expect to be working in a competitive market,” he added.
Minister Rwangombwa explained that the average pump prices for both petrol and diesel at Rwf1060 per litre in the country are much higher than the regional averages of Rwf839 per litre for petrol and Rwf816 per litre for diesel.
“This is due to the fact that Rwanda’s petroleum tax rates for petrol and diesel at Rwf283 and Rwf250 per litre for petrol and diesel respectively are about 60 percent and about 232 percent respectively higher than the regional averages of Rwf167.3 and Rwf107.9 per litre for petrol and diesel respectively,” Rwangombwa explained.
Managing Director of Oil and Gas Companies Suppliers (GEMECA)’s, Eugene Kayigamba, told Business Times that: “This is a good initiative for the government towards controlling inflation,”
In his budget speech, Rwangombwa said the situation is not only untenable but is also a major factor in transport costs which in turn put pressure on the country’s domestic inflation.
“The Government has therefore decided that the time has come to address this particular tax issue and start harmonising the tax rates in Rwanda to those in the region and at the same time reduces the inflationary pressure emanating from world fuel and food price increases,” he explained.
He further informed that the proposed reduction will be done in two stages and I will deal with this issue in detail when I discuss our revenue policies for fiscal year 2011/2012.
“We are hoping that with this tax reduction measure together with our entire fiscal policy and the monetary and exchange rate measures that BNR will take, we can maintain inflation in 2011 at about 7.5 percent by end December as we have projected,” Rwangombwa said.