At a major wholesale trading center located in eastern Rwanda, wholesalers pay less tax than they should, by scheming with buyers.
The payment receipts that the wholesalers give to traders, under-state the actual amount paid. The tax avoidance scheme has been taking place for a long time without the authorities stopping it, according to many different people who agreed to speak to us.
The Rwanda Revenue Authority’s (RRA) local and regional office feigned ignorance when told of the scheme by our Reporter. A senior RRA official from headquarters in Kigali later said the agency was aware of such tax avoidance tactics, and that RRA would move to dismantle it.
In Kabarondo sector, located in Kayonza district, there is a bustling trading center actually called Kabarondo. It is where the big wholesalers have shops and stores. Every Monday and Thursday, traders come from Kayonza, Ngoma and as far as Kirehe districts to buy new stock.
During our investigation in collaboration with Radio/TV IZUBA based in Ngoma district, we accessed many receipts which traders confirmed had a less amount than what they had actually paid. For example, one trader bought sugar worth Rwf 80,000 and it is the exact amount they paid in cash. However, the Electronic Billing Machine (EBM) receipt from the wholesale shop reads Rwf 66,200.
Another receipt, the trader paid Rwf 11,500 cash for a packet of soap. But the receipt reads Rwf 10,800.
With this under-statement on receipts, the wholesalers in turn also present copies of the same receipts to the tax body’s agents. As a result, the wholesalers are declaring less than they actually got from their businesses.
Kabarondo is a relatively big business center partly also because its located on highway from Tanzania. More than 80% of Rwanda’s imports come via Dar es Salaam port, especially now that relations with Uganda are at the lowest.
The amounts of balances that the cunning wholesalers are keeping, seem insignificant. However, when dozens or even hundreds of traders are involved, and over a long period of time, the wholesalers are meticulously avoiding to pay the actual tax bill. As a result, RRA could be missing out on millions.
Another of the receipts we have is for cooking oil, where the trader paid Rwf 26,000 cash, yet Rwf 25,500 is what was written on the receipt.
Many traders who spoke to us said they had been getting under-stated receipts for some time, but that it is not their job to follow up. All shared the notion that ‘what is important to me is getting the exact amount of goods I came to buy’.
One trader said: “What takes me to the Kabarondo trading center is to restock my shop. As long as I get exactly what I want from the wholesaler, I never even check on the receipts given to me. It is not important.”
Another said to us: “I never check on the receipts. The issue for me is ‘Have I received the exact quantity of goods I came to buy?’. The answer is ‘Yes’. What else would I be looking for, to be bothered about what is written on the receipt.”
The tax avoidance scheme is done by many different wholesalers in this Kabarondo trading center, that it has become a normal way of doing business. Our investigation confirmed the scheme was being done by four different wholesalers. We visited their shops and witnessed how it is done, proving the practice was widespread.
For us to be able to get the receipts, and confirm the scheme existed, it has taken us nearly three months. Part of the process we used was to convince traders to go with us to the trading center to witness the payments and the writing of the receipts.
On a rather positive note, some wholesalers claimed they were not engaged in evading state taxes. One wholesaler who declined to be named said he and others like him who don’t under-state the payments, know identities of those who are involved in the scheme to defraud the tax body.
Asked why they have not come out to report that matter, he said: “We know those who practice the tax avoidance fraud. Some individually own as many as six different big supply shops in this same Kabarondo center.”
He added: “Apart from under-stating receipts, those wholesalers also load or offload goods usually at night when no RRA staff is present, which is illegal. We know all those bad practices (amanyanga). Why would I go around reporting people which will cause me unnecessary friction with other businesspeople?”
When we contacted local and regional RRA offices, staff there said they cannot discuss their work with the media. The staff denied there were traders loading and offloading goods at night without RRA agents on site.
However, some days later they called our Reporter saying they had secured interviews with RRA headquarters in Kigali. This is clear indication the RRA staff had been caught off-guard with information they never expected to be happening in their region.
Uwitonze Jean Paulin, the Deputy Commissioner for Taxpayer Services at Rwanda Revenue Authority is the one who later contacted our Reporter after being notified by the local office about our investigation.
He said: “We are aware such unscrupulous businesspeople, who under-state receipts, do exist. We have been working hard to end the practice completely. When we identify them, we punish them.”
“One of the tactics they use is to tell the buyer that the EBM is not working. In other cases, the wholesalers connive with the buyers and agree to share the balance. What some buyers do, is give back the receipt to the wholesaler, so that there is no evidence.”
This story was produced as a collaboration with Radio/TV IZUBA, community broadcaster based in Ngoma district, also covering eastern Rwanda.