Pressure mounts on Rwandan govt to review tax breaks
The East African - 6 hours ago
By ALEX NGARAMBE Rwanda Today
Posted Wednesday, June 25 2014 at 15:53

A Rwandan man carries a sack of maize from the market. Experts say
taxes on basic commodities like foodstuff put a heavy burden on poor
households. Photo/Cyril Ndegeya
The Rwanda private sector, the civil society and the business
community want tax exemptions for basic consumer goods.
The call is for a review of among other forms of taxes the value added
tax (VAT) for processed foodstuff such rice and maize flour, and
withholding tax.
Rwanda's tax regime provides a list of processed foodstuff which is
exempted from the 18 per cent VAT as well as five per cent withholding
tax which are considered high.
According to the tax act, only commercial oriented importers without
tax clearance certificates should pay five per cent on imports.
However, it has been found that even non-commercial importers are also
subjected to withholding tax which reduces purchasing power.
It is on this backdrop that Rwanda Revenue Authority (RRA) is being
urged by the business community to review and consider tax exemptions
for the commodities.
"Rice and maize flour are basic commodities and any tax on such
foodstuff will be borne by ordinary consumers whose purchasing power
is already low," said Ms Anataria Karimba, who is in charge of private
sector and civil society organisation at Trade Mark East Africa Rwanda
office.
Taxes on basic commodities like foodstuff put a heavy burden on poor
households at a time when Rwandans living below the poverty line is 45
per cent.
The business community is decrying taxes imposed on non-commercial
imports which are not usually refunded by the tax authority.
RRA has only refunded 20 per cent of the total withholding tax
collected on non-commercial imports.
"The taxes are suffocating our young small and medium enterprises
(SMEs) which could be a key driver for private sector and economic
growth and the sooner the exemptions of some of these taxes the
better," said Ms Claudine Mukeshimana, Executive Director, Rwanda of
Association Manufacturers.
SMEs which are not registered in the tax regimes are taxed at a flat
rate of three per cent or pay lump sum profit tax and they have no
chance to reclaim withholding tax on their imports.
Tax experts say that exemptions for excise duty are good for the
economy because it encourages manufacturing and production.
"With excise duty exemptions, tax compliance will be enhanced and the
exemptions would also attract foreign investments in the country which
would pay other forms of taxes which is good for the economy," said Mr
Angello Musinguzi, a tax expert with KPMG.
The excise duty in Rwanda varies from five per cent to 150 per cent
depending on the goods for example beers pay 60 per cent while mineral
water pays 10 per cent and wines and liquors pay 70 per cent. For
tobacco, duty paid is 150 per cent as the country intends to reduce
consumption due to health concerns.
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SIBOMANA Jean Bosco
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