PRESENTED BY BEN KAGARAMA BAHIZI                      COMMISSIONER GENERAL-RRA                 TO THE SCHOOOL OF FINANCE A...
RWANDA  REVENUE  AUTHORITY                              Contents        Taxation in Rwanda- Background                    ...
RWANDA  REVENUE  AUTHORITY        Taxation background in Rwanda                     g    •   Taxation in Rwanda dates way ...
RWANDA  REVENUE  AUTHORITY                    RRA BACKGROUND     The Rwanda Revenue Authority was established under the la...
RWANDA  REVENUE  AUTHORITY                 MISSION STATEMENT    RRA vision    “To become a world-class efficient and moder...
RWANDA  REVENUE  AUTHORITY                 Various taxes administered by RRA    • PROFIT TAX: Taxes levied on profit makin...
RWANDA  REVENUE  AUTHORITY      Various taxes administered by RRA    • The final consumer pays the tax and not the person ...
RWANDA  REVENUE  AUTHORITY    Various taxes administered by RRA        of the month for which the tax was due. In the     ...
RWANDA  REVENUE  AUTHORITY      Various taxes administered by RRA    • CONSUMPTION TAX: Taxable goods and services        ...
RWANDA  REVENUE  AUTHORITY       RWANDAN TAX RATES COMPARED TO OTHER EAC                      COUNTRIES         COUNTRY VA...
RWANDA  REVENUE  AUTHORITY           Tax collection against Budget                  1998-June 2011    Fiscal      i l     ...
RWANDA  REVENUE  AUTHORITY           Tax collection against Budget                  1998-June 2011    Fiscal year      i l...
RWANDA  REVENUE  AUTHORITY                 PART TWO    3/21/2012                                       13www.rra.gov.rw   ...
RWANDA  REVENUE  AUTHORITY           THE LINKAGE BETWEEN A GOVERNMENT’S EFFORTS IN        RESOURCE MOBILISATION AND EFFICI...
RWANDA  REVENUE  AUTHORITY        THE LINKAGE BETWEEN A GOVERNMENT’S EFFORTS IN                 G            GO          S...
RWANDA  REVENUE  AUTHORITY        How can Rwanda be self sustaining in its social economic and                            ...
RWANDA  REVENUE  AUTHORITY          How can Rwanda be self sustaining in its Social-                 Economic and Politica...
RWANDA  REVENUE  AUTHORITY           How can Rwanda be self sustaining in its Social-                  Economic and Politi...
RWANDA  REVENUE  AUTHORITY           How can Rwanda be self sustaining in its Social-                  Economic and Politi...
RWANDA  REVENUE  AUTHORITY                 Strategies to mobilize tax revenues    Online Tax Clearance certificate: This a...
RWANDA  REVENUE  AUTHORITY                 Strategies to mobilize tax revenues    •   Online Tax Calculator: This online f...
RWANDA  REVENUE  AUTHORITY                 Strategies to mobilize tax revenues    • E‐filling and e‐payment processes:    ...
RWANDA  REVENUE  AUTHORITY                 Tax Incentives granted to investors    • Training and research expenses:      A...
RWANDA  REVENUE  AUTHORITY                 Tax Incentives granted to investors                                g    •   Pro...
RWANDA  REVENUE  AUTHORITY                 Tax Incentives granted to investors    •   If a taxpayer exports commodities or...
RWANDA  REVENUE  AUTHORITY                 Cross border Trade facilitation initiatives   Reduction of import related docum...
RWANDA  REVENUE  AUTHORITY                Trade facilitation initiatives    •   Revenue Authorities Digital Data Exchange ...
RWANDA  REVENUE  AUTHORITY                Trade facilitation initiatives    1.  ELECTRONIC SINGLE WINDOW SYSTEM (ESWS): It...
RWANDA  REVENUE  AUTHORITY                 Key challenges faced    • L tax paying culture among taxpayers;      Low       ...
RWANDA  REVENUE  AUTHORITY                 The role of Citizens /Universities???    1. Develop an early tax payment Cultur...
RWANDA  REVENUE  AUTHORITY                                Conclusion    •   It is a responsibility of all Rwandans to play...
RWANDA  REVENUE  AUTHORITY                     Thank you                       Merci                     Murakoze    3/21/...
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Taxation Background in Rwanda and The Linkage Between a Government’s Efforts In Resource Mobilisation and Efficient Service Delivery

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Taxation Background in Rwanda and The Linkage Between a Government’s Efforts In Resource Mobilisation and Efficient Service Delivery

  1. 1. PRESENTED BY BEN KAGARAMA BAHIZI COMMISSIONER GENERAL-RRA TO THE SCHOOOL OF FINANCE AND BANKINGwww.rra.gov.rw MARCH 21st 2012
  2. 2. RWANDA  REVENUE  AUTHORITY Contents Taxation in Rwanda- Background g RRA background Mission statement Various taxes administered by RRA Rwandan tax rates compared to other EAC countries Collection against budget:1998-2011 The Linkage between a Government’s efforts in Resource Mobilisation and efficient service delivery Strategies to mobilize tax revenues Tax Incentives granted to investors Trade facilitation initiatives Challenges Your role as a public institution p 3/21/2012 2www.rra.gov.rw Taxes for Growth & Development
  3. 3. RWANDA  REVENUE  AUTHORITY Taxation background in Rwanda g • Taxation in Rwanda dates way back in 1912 when property tax was introduced; • After independence, taxes were formally introduced in Rwanda by the law of the 2nd June 1964 concerning Profit Tax; • Customs and Excise duties were also introduced by the law of 17th July 1968; • Law No.8 of 26 June,1997 on profit tax was introduced • Law No 9 of 26 June 1997 on tax procedures No.9 June,1997 • In 2001 VAT law was introduced requiring taxpayers to start paying Value Added Tax Tax. • Law No.16/2005 on direct taxes on income • Law No 25/2005 of 4th , December 2005 on tax procedures No.25/2005 • Before the establishment of RRA, the Central Government through the Ministry of Finance was responsible for tax collection collection. 3/21/2012 3www.rra.gov.rw Taxes for Growth & Development
  4. 4. RWANDA  REVENUE  AUTHORITY RRA BACKGROUND The Rwanda Revenue Authority was established under the law N° 15/97 of 8 November 1997 as y a quasi-autonomous body with the mission of assessing, collecting, and accounting for tax, customs duties and other specified revenues. RRA was established as part of the reform programme by the Government of Rwanda designed to restore and strengthen the main economic institutions of the country. Additionally, the Government wanted to improve its resource mobilisation capacity while providing the public with better quality and courteous services In a bid to mobilise more resources RRA is services. resources, therefore required to assist taxpayers in understanding and meeting their tax obligations thus raising their compliance. This is achieved through effective administration and enforcement of the laws relating to those revenues. The RRA is also responsible for providing advice to the Government on tax policy matters relating to revenue collections. It performs other duties in relation to tax administration, as may be directed from time to time by the Cabinet 3/21/2012 4www.rra.gov.rw Taxes for Growth & Development
  5. 5. RWANDA  REVENUE  AUTHORITY MISSION STATEMENT RRA vision “To become a world-class efficient and modern revenue agency, fully financing national needs.” RRA mission statement Mobilize revenue for economic development through efficient and equitable services that promote business growth.” RRA core strategic values i l • Integrity; • Customer focus; • Transparency; • Professional Service delivery; • Teamwork Teamwork. 3/21/2012 5www.rra.gov.rw Taxes for Growth & Development
  6. 6. RWANDA  REVENUE  AUTHORITY Various taxes administered by RRA • PROFIT TAX: Taxes levied on profit making activities • VALUE ADDED TAX: Enterprises are required to register for VAT if their turnover is above 20 Million Rwf for any period of 12 month or 5 Million Frw in three consecutive months in the last quarter of the year. 3/21/2012 6www.rra.gov.rw Taxes for Growth & Development
  7. 7. RWANDA  REVENUE  AUTHORITY Various taxes administered by RRA • The final consumer pays the tax and not the person registered for purposes of collecting and accounting for and paying VAT to RRA. • PAY AS YOU EARN (PAYE): The tax law requires that when an employer makes available employment income to an employee the employer must withhold, declare, and pay the PAYE tax to the Rwanda Revenue Authority within 15 days following the end 3/21/2012 7www.rra.gov.rw Taxes for Growth & Development
  8. 8. RWANDA  REVENUE  AUTHORITY Various taxes administered by RRA of the month for which the tax was due. In the due case of engaging a casual laborer for less than 30 days during a particular tax year, the year employer shall withhold 15% of the taxable employment income of the casual laborer. 3/21/2012 8www.rra.gov.rw Taxes for Growth & Development
  9. 9. RWANDA  REVENUE  AUTHORITY Various taxes administered by RRA • CONSUMPTION TAX: Taxable goods and services Consumption tax is levied on the following locally manufactured products: Beers, lemonades, cigarettes, wines, spirits and mineral water made in Rwanda and telephone communication supplied by telephone telephone. • CUSTOMS DUTIES: Taxes charged on imported g p goods. 3/21/2012 9www.rra.gov.rw Taxes for Growth & Development
  10. 10. RWANDA  REVENUE  AUTHORITY RWANDAN TAX RATES COMPARED TO OTHER EAC COUNTRIES COUNTRY VAT CO PROFIT  CO S O CONSUMPTION  O CUSTOMS   ll C S O S All goods  d TAX TAX DUTIES from EAC   are zero  rated t d RWANDA 18% 30% 150% (5%‐150%) 25% 0% Uganda 18% 30% 130% 25% 0% Kenya  Kenya 18% 30%,  30% 135% 25% 0% (37.5%) Tanzania 20% 30% 30% 25% 0% (now  18%) Burundi 18% 35% 100% 25% 0% 3/21/2012 10www.rra.gov.rw Taxes for Growth & Development
  11. 11. RWANDA  REVENUE  AUTHORITY Tax collection against Budget 1998-June 2011 Fiscal  i l Total tax Revenues  Total national  l l i l % contribution of  % ib i f year  (bn) budget (bn) tax revenues to  national budget 1998 68.4 173.2 39.5% 1999 67.1 174.1 38.5% 2000 68.4 169.2 40.4% 2001 81.1 184.8 43.9% 2002 95.7 95 7 207.6 207 6 46.1% 46 1% 2003 119.1 252.0 47.3% 2004 136.2 334.5 40.7% 2005 173.5 374.2 46.4% 2006 198.4 396.2 50.1% 3/21/2012 11www.rra.gov.rw Taxes for Growth & Development
  12. 12. RWANDA  REVENUE  AUTHORITY Tax collection against Budget 1998-June 2011 Fiscal year  i l Total  tax  l Total national  l i l % contribution  % ib i Revenues (bn) budget (bn) of tax revenues  to national  budget b d t 2007 247.0 528.0 46.8% 2008 344.3 623.2 55.2% Jan‐June 2009  188.0 392.1 47.9% July 2009‐June  385.2 899.0 42.8% 2010 July 2010‐June  476.9 984.0 48.5% 2011 3/21/2012 12www.rra.gov.rw Taxes for Growth & Development
  13. 13. RWANDA  REVENUE  AUTHORITY PART TWO 3/21/2012 13www.rra.gov.rw Taxes for Growth & Development
  14. 14. RWANDA  REVENUE  AUTHORITY THE LINKAGE BETWEEN A GOVERNMENT’S EFFORTS IN RESOURCE MOBILISATION AND EFFICIENT SERVICE DELIVERY • The raising of tax revenues is arguably the most central activity of any state, f • Revenue from taxation literally sustains the existence of the state, and provides the necessary financial resources for all , p y social and economic activity, • Taxation therefore lies at the administrative heart of any government and provides the basis by which public goods are made available and effective governance is implemented, • Taxation is an avenue through which citizens are most directly connected to the state, • It is an important catalyst for public demands with regard to a government s government’s responsiveness and accountability accountability, • Taxation can improve responsiveness and accountability by providing incentives for citizens and government to enter into a “tax bargain” or “fi “t b i ” “fiscal contract”. l t t” 14 3/21/2012www.rra.gov.rw Taxes for Growth & Development
  15. 15. RWANDA  REVENUE  AUTHORITY THE LINKAGE BETWEEN A GOVERNMENT’S EFFORTS IN G GO S O S RESOURCE MOBILISATION AND EFFICIENT SERVICE DELIVERY • Through this process, citizens accept and comply with taxes in exchange for government providing effective services, the rule of law and accountability. • Tax b T bargains are mutually b i t ll beneficial, as citizens receive fi i l iti i improved governance while the government receives larger, more predictable and more easily collected tax revenues. • It follows that, governments relying mainly on tax revenue are likely to be more accountable than those that rely on non-tax revenue sources, most notably foreign aid. • Few, if any, governments have been able to implement highly effective tax systems without first entering into a national dialogue about taxation. dialog e abo t ta ation 3/21/2012 15www.rra.gov.rw Taxes for Growth & Development
  16. 16. RWANDA  REVENUE  AUTHORITY How can Rwanda be self sustaining in its social economic and political growth? • Taxation is the lifeblood of development and, it is desirable for developing countries to take responsibility for improving their own systems, y , • It is critical that any development initiatives are supported primarily by a country’s citizens by putting forward their own contribution (thru payment of taxes) before any global partners are called upon. • The need to support domestic resource mobilisation is thus growing due to declining revenues from traditional tariffs on cross border trade, which are being incrementally removed under trade-liberalisation measures as developing countries g integrate in the global economy. (Also due to donor fatigue and own domestic crisis) 3/21/2012 16www.rra.gov.rw Taxes for Growth & Development
  17. 17. RWANDA  REVENUE  AUTHORITY How can Rwanda be self sustaining in its Social- Economic and Political Growth? • Efforts to generate and make available higher levels of domestic resources, and to ensure their effective utilization, in support of service-delivery programmes, thus, need to be pp y p g , , intensified. WHAT DOES IT REQUIRE? • Collective effort by all stakeholders, (Gov’t and Citizens)) 3/21/2012 17www.rra.gov.rw Taxes for Growth & Development
  18. 18. RWANDA  REVENUE  AUTHORITY How can Rwanda be self sustaining in its Social- Economic and Political Growth? The Role of Gov’t (RRA) ( ) • After its establishment in 1998; a number of things happened: • Staff Recruitment • Intensive Capacity Building (on-job, formal upgrade y g( j g including professional and masters programs) • The Update of Tax Laws (From 1912, 1968, 1997, 2001, 2005 etc….) the process is continuous as need arises. 3/21/2012 18www.rra.gov.rw Taxes for Growth & Development
  19. 19. RWANDA  REVENUE  AUTHORITY How can Rwanda be self sustaining in its Social- Economic and Political Growth? The Role of Gov’t (RRA, Cont’d) Gov t Cont d) • The Reform and Modernization process: (Service Delivery & Trade Facilitation) • In 2003, RRA Modernization Project was formed to steer the j reform process. • Intensive Taxpayer Education, • Quality Assurance and • Revenue Protection functions were put in place to strengthen education, check on internal systems and fight against smuggling & corruption. 3/21/2012 19www.rra.gov.rw Taxes for Growth & Development
  20. 20. RWANDA  REVENUE  AUTHORITY Strategies to mobilize tax revenues Online Tax Clearance certificate: This assists taxpayers to access bank loans, bidding for tenders, t f t d transfer of property etc more easily and h f f t t il d hence promote d i b i t doing business. VAT Quarterly payment: In a bid to promote SMEs in Rwanda where most taxpayers doing businesses fall -98%, the government revised the VAT law giving an opportunity f SME with an annual turnover equal or l i for SMEs i h l l less than F 200 000 000/ h Frw200,000,000/ to file and pay their VAT returns on a quarterly basis (ensures cash flow, interest free borrowing from gov’t). Introduction of Bloc Management: RRA opened up bloc offices in Nyabugogo, Kicukiro and Kimironko areas, with the objective of reaching out to SMEs by teaching, advising them in relation to tax information and nurture them to become l b large ttaxpayers. PLUS R iRegional offices. l ffi Online registration of taxpayers through RDB where taxpayers can now get TIN upon registration of their businesses without necessarily coming to RRA offices. 3/21/2012 20www.rra.gov.rw Taxes for Growth & Development
  21. 21. RWANDA  REVENUE  AUTHORITY Strategies to mobilize tax revenues • Online Tax Calculator: This online facility assists taxpayers in minimizing arithmetical errors that might occur when calculating taxes. It also simplifies work and saves time that would be taken if one decided to do it manually • Recruitment of T consultants and T Ad i R it t f Tax lt t d Tax Advisors: It i very i is important t h t t to have these two experienced groups of people in order to advise taxpayers regarding tax matters. e.g. sensitizing them on how to keep proper books of accounts for their businesses, businesses how and when to file their due taxes in order to promote professionalism in doing business. Dialogues with Taxpayers: • Tax Issues Forum: RRA in collaboration with the Private Sector Federation conduct quarterly meetings where members from the private sector and RRA meet and discuss pertinent issues regarding tax matters. This includes seeking joint solutions t challenges f d b th b i l ti to h ll faced by the business community. it • Tax advisory council (TAC): A forum where RRA meets with provincial and district local authorities to discuss about tax issues and come up with strategies to increase tax b i base and revenue collection. d ll i 3/21/2012 21www.rra.gov.rw Taxes for Growth & Development
  22. 22. RWANDA  REVENUE  AUTHORITY Strategies to mobilize tax revenues • E‐filling and e‐payment processes: • This is still in a piloting phase and tests have proved successful, • Returns/declarations and payment will be made on line‐ no need to go to RRA or meet tax officials. • Soon to be launched‐April 2012, • Establishment of RRA call center :3004 to address taxpayer concerns as quickly as possible. 3/21/2012 22www.rra.gov.rw Taxes for Growth & Development
  23. 23. RWANDA  REVENUE  AUTHORITY Tax Incentives granted to investors • Training and research expenses: All Training and Research expenses incurred for promotion of business activities during a tax period are deductible from taxable profits in g p p accordance with provisions of Article 21 of the law on direct taxes on income. • Loss carried forward: If the determination of business profit results in a loss in a tax period, the loss may be deducted from the business profit in the next five (5) tax periods, earlier losses being deducted before later losses. However, foreign sourced losses can neither reduce domestic sourced business profits nor can they reduce future domestic sourced business p profits. 3/21/2012 23www.rra.gov.rw Taxes for Growth & Development
  24. 24. RWANDA  REVENUE  AUTHORITY Tax Incentives granted to investors g • Profit Tax Discount: A registered investor is entitled to a profit tax discount of: 1° two percent (2%) if he/she employs between one hundred (100) and two hundred (200) Rwandans; 2° five percent (5%) if he/she employs between two hundred and one (201) and four hundred (400) Rwandans; 3 3° six percent (6%) if he/she employs between four hundred and one (401) and nine hundred (900) Rwandans; 4° seven percent (7%) if he/she more than nine hundred (900) Rwandans. The tax discount mentioned above is granted to the investor only if he or she maintains the employees for a period of at least six (6) months during a tax period, and are not in the category of employees who pay at the rate of zero percent (0%) as stipulated in Article 50 of the law nº 16/2005 of 18/08/2005; 3/21/2012 24www.rra.gov.rw Taxes for Growth & Development
  25. 25. RWANDA  REVENUE  AUTHORITY Tax Incentives granted to investors • If a taxpayer exports commodities or services that bring to the country between three million (3,000,000) US dollars and five million (5,000,000) US dollars in a tax period, he or she is entitled to a tax discount of three percent (3%). • If he or she exports commodities or services that bring to the country more than five million (5,000,000) US dollars in a tax period, he or she is entitled to a tax discount of five percent (5%). • Companies that carry out micro finance activities approved by competent authorities pay corporate income tax at the rate of zero percent (0%) for a period of five (5) years from the time of the approval of the activity. However, this period may be renewed by the order of the Minister. 3/21/2012 25www.rra.gov.rw Taxes for Growth & Development
  26. 26. RWANDA  REVENUE  AUTHORITY Cross border Trade facilitation initiatives Reduction of import related documents. In an effort to facilitate trade and simplify the processes of doing businesses in Rwanda, Rwanda Revenue Authority-Customs Services Department has revised documents required as follows; The mandatory documents are: Commercial Invoice, Packing List, Bill of Lading/Airway Bill • Pre-clearance System: Declarations are processed before the arrival of consignments at the borders; Quick documentary verification is conducted upon arrival of consignment • Compliant trader scheme (Blue and Gold Channels): It is granted to compliant companies with the lowest risks (65% of imports are under this scheme).The compliant companies have their goods released without any customs verification;No p p g y offloading into warehouses; • Companies granted this scheme are subjected to Post Clearance Audit (PCA) on risk basis. • AUTOMATION PROCESS: ASYCUDA World (Automated System for Customs Data) has been rolled out to all major Customs Offices ;Transit bonds acquittals done immediately on arrival at destination p ; Customs computerization speeds up the y post; p p p clearance of goods and reduces delays in deliveries to customers 3/21/2012 26www.rra.gov.rw Taxes for Growth & Development
  27. 27. RWANDA  REVENUE  AUTHORITY Trade facilitation initiatives • Revenue Authorities Digital Data Exchange (RADDEx):It is a computer system that facilitates exchange of Customs data between EAC Partner States; Advance information accessed before arrival of goods. • RADDEX reduces delays in cargo clearance by avoiding the duplication of data capturing at the border posts; • Mobile Cargo scanners: 3 mobile Cargo Scanners deployed at Gikondo Gatuna and Rusumo; Scanned goods are not offloaded into warehouses ; g unless there is suspicion; No extra fee charged on scanned consignments; Reduces clearance time because manual, physical inspection is minimised. • Simplified Certificate of Origin: Simplified Certificate of Origin ensures that Customs border posts bordering with our neighboring countries facilitate small scale cross-border traders; using a common list of approved goods imported by small scale cross border traders with a commercial value not exceeding US$2000. 3/21/2012 27www.rra.gov.rw Taxes for Growth & Development
  28. 28. RWANDA  REVENUE  AUTHORITY Trade facilitation initiatives 1. ELECTRONIC SINGLE WINDOW SYSTEM (ESWS): It was implemented recently by Customs and its partners; RDB, RBS, MAGERWA and ministry of Health. This allows all parties involved in trade and transport to lodge standardized information and documents with a single entry point. It is still in the g yp piloting phase and plans are to make all relevant agencies registered with this new system. Future projects: p j 1. Online tax payment system :e-tax and e-payment where taxpayers will be required to declare and pay tax returns online. 2. Electronic Cargo Tracking System will facilitate legitimate trade and improve 2 turn around time for transporters as delays in cargo movement will be eliminated; 3. Electronic Tax devices: These are automated machines that will help taxpayers in real time issuance of tax invoices . 3/21/2012 28www.rra.gov.rw Taxes for Growth & Development
  29. 29. RWANDA  REVENUE  AUTHORITY Key challenges faced • L tax paying culture among taxpayers; Low i l • Large informal sector • Ignorance of some taxpayers especially SMEs regarding tax information. • The structure of the Rwandan economy largely dominated by subsistence Agriculture • Businesses are still largely done manually 3/21/2012 29www.rra.gov.rw Taxes for Growth & Development
  30. 30. RWANDA  REVENUE  AUTHORITY The role of Citizens /Universities??? 1. Develop an early tax payment Culture (Compliance) 2. Include tax education in studies 3. Link taxation to National Development • Be advocates of taxation and all facilities presented p • Invest heavily in research within the Rwandan taxation system to identify the existing gaps and new ideas that can be relied on to formulate innovation to tax compliance mechanisms This will legitimize citizens tax-bargain and social contract with government as a basis. 3/21/2012 30www.rra.gov.rw Taxes for Growth & Development
  31. 31. RWANDA  REVENUE  AUTHORITY Conclusion • It is a responsibility of all Rwandans to play a positive role in ensuring that Domestic Resource mobilization for Social-Economic, growth and development and self reliance is achieved- The RRA VISION • RRA will continue to make reforms that streamline taxation for growth and development (our MOTO/SLOGAN). • RRA will continue to facilitate doing business hence promoting investment business, in the country. 3/21/2012 31www.rra.gov.rw Taxes for Growth & Development
  32. 32. RWANDA  REVENUE  AUTHORITY Thank you Merci Murakoze 3/21/2012 32www.rra.gov.rw Taxes for Growth & Development

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