Experts “Expected Tax Amnesty” From Ndagijimana’s Budget
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In attempt to widen the tax base, experts had hoped Finance and Economic Planning Minister Dr Uzziel Ndagijimana would announce an amnesty so that those hiding can come out.
A tax amnesty is when government offers incentives like no jail to encourage the voluntary disclosure of previously undisclosed assets and income for all outstanding tax liabilities.
There are many reasons for non-compliance in declaring and paying taxes. In some cases, the tax system makes it very difficult or impracticable to comply with all tax obligations.
Other reasons for non-compliance include the high cost of compliance, the complexity and ambiguity of the tax rules, ignorance of those rules, the lack of consequence for past non-compliance, a deficit of public trust in government, and a failure to provide tax-funded social benefits and services.
At the moment, Rwanda has about 200,000 taxpayers, who are covering the Rwf 1.8 trillion domestic revenue that is paying for 60% of the 2019-2020 budget totalling Rwf2.87tillion ($3.2b).
For years, government has brought in various tools to increase collections by the Rwanda Revenue Authority (RRA).
In the budget unveiled last week, the Finance Minister said government would roll out Electronic Billing Machines (or ‘EBM for all’) to all persons engaged in commercial activities.
Accounting firm PricewaterhouseCoopers (PwC), in its assessment of the budget says it had expected the Minister to announce a tax amnesty as part of the ongoing measures to improved tax compliance.
Though a radical move, tax amnesty was successful in Indonesia, Turkey, Italy, Pakistan and South Africa. Nigeria has struggled with the regime since 2017, but has seen less results because of deep-rooted mistrust the people have for government.
PwC says amnesty will bring “reluctant taxpayers in from the cold – creating a win-win for the taxpayer, to able the tax payer formalize and correct past errors or omissions without a cost of penalties”.
“For the taxman, the tax amnesty will provide additional revenue and potentially widen the tax base in cases of previously unregistered taxpayers.”
PwC adds: This would certainly be an opportunity to wipe the slate clean, and start afresh. We hope the Minister can consider such a move in the near future.”
Associate Tax Director at PwC Rwanda, Frobisher Mugambwa said in the firm’s assessment that “given the progress Rwanda has made in improving tax compliance a tax amnesty is worth considering.”
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