Rwandan taxman faces revenue shortfall due to defaulters

 

The Rwanda Revenue Authority headquarters in Kigali. The taxman is facing a shortfall of Rwf90 billion in tax collection as the rate of defaulters increases. PHOTO | CYRIL NDEGEYA |  NATION MEDIA GROUP

By KABONA ESIARA, RT Special Correspondent

In Summary

• Financial experts attribute the high rate of tax defaulters to poor corporate governance in business and a culture of tax evasion.
• Business community claims the economy has been slow resulting in low returns, but tax experts advise the traders to declare their loses to the tax body.
• The high rate of tax defaulting raises questions about the efficiency of Rwanda Revenue Authority (RRA). The tax body is perpetually short of auditors. It can take RRA 10 years to audit a suspected tax evader

The Rwanda Revenue Authority is facing a shortfall of Rwf90 billion in tax collection as the rate of defaulters increases.

Financial experts attribute the high rate of tax defaulters to poor corporate governance in business and a culture of tax evasion.

It is this culture, according to analysts that has sustained the existence of unscrupulous financial advisors who help taxpayers to avoid declaring their taxes.

But the business community claims the economy has been slow resulting in low returns, but tax experts advise the traders to declare their loses to the tax body.

However, there is growing fear that the high default rate could result in a shortfall in revenue, further increasing the country’s dependency on donor aid.

The Ministry of Finance and Economic Planning had raised targets for locally generated revenue to Rwf906.6 billion in a bid to reduce reliance on donor funds.

The high rate of tax defaulting raises questions about the efficiency of Rwanda Revenue Authority (RRA). The tax body is perpetually short of auditors. It can take RRA 10 years to audit a suspected tax evader.

The few auditors the tax body has trained keep leaving for better pay in the private sector. This shortage of auditors forces the tax body to do selective auditing, which has resulted in a high rate of defaults.

“We use risk-based auditing,” said Richard Tusabe commissioner-general RRA, adding that they are unable to carry out routine audits because of the few staff.

RRA may need to create awareness about the need for business to meet their tax obligations.

READ: Rwandan tax body misses targets, campaigns to stop losses

Angello Musinguzi of KPMG said the lack of tax knowledge has contributed to the high default rates.

Obligation

“Business owners have to know that paying taxes is an obligation,” said Mr Musinguzi. adding that the country’s tax system enables businesses to file their returns without involving RRA.

The tax body has introduced platforms such as e-filing and payment, electronic billing machines and mobile tax payment to facilitate taxpayers and make paying taxes easier and convenient.