Businessesshould use the extension of a number of tax cuts and exemptions announced by government last year to consolidate gains achieved this fiscal year and expand their operations, experts have said.

David Baliraine, the associate director and head of tax services at global consultancy firm EY (formerly Ernst & Young), urged the business community to take advantage of the exemptions to grow their enterprises and improve service delivery.

Finance Minister Amb Claver Gatete announced that government would extend tax cuts and exemptions on a number of commodities and equipment to facilitate projects and businesses that drive economic growth during the 2015/16 national budget speech last week. According to Gatete’s pronouncement, road tractors and semi-trailors will continue to be tax exempt in the next financial year compared to 25 per cent import duty paid previously. Importers of motor vehicles with capacity of between five and 20 tonnes will be charged 10 per cent, down from 25 per cent and vehicles with capacity in excess of 20 tonnes are tax exempt.

Importers of buses licensed to carry between 25 and 50 passengers will part with 10 per cent worth of import tax, down from 25 per cent, while those with capacity to transport over 50 passengers will not be required to pay import duty compared to 25 per cent previously.

Gatete explained last week that the exemptions and tax cuts are in the context of Common External Tariffs on imports coming from outside the East African Community (EAC) bloc. They are renewed annually by EAC finance ministers whenever they find need.

Analysts say the extension of the tax waivers does not only mean a further reduction in the cost of doing business, but is also a relief to the informal sector which forms 98 per cent of total businesses in Rwanda.

Speaking during a business breakfast organised by EY to review East Africa Budget in Kigali yesterday, Baliraine said the exemptions open a window of opportunity, which the investors should exploit fully to improve and expand their operations.

On government plans to broaden the tax base, Baliraine said the initiative is designed to ensure that people do not take refuge in the informal sector because it is largely exempted from paying some taxes but rather they can make money and pay taxes.

"When you for example look at government’s strategy of broadening tax base by integrating 6,000 co-operatives in the taxable bracket, sector specific VAT registration and conducting a study on possible taxable farm and livestock production; it is clear that government is sending a message that it is prepared to foot most of its bills without donor support,” he explained.

Why domestic borrowing

Baliraine added that the fact that regional governments are emphasising the need to fund their budgets using domestically-raised revenues presents commercial banks a big business opportunity to harness.

"Lending to government is more risk free; therefore, commercial banks should take advantage of the opportunity and lend more to government rather than individuals,” he said.

The need to raise resources through Treasury bond issuance to fund infrastructure and other projects cannot be underestimated.

And according to Konde Bugingo, the chief executive officer of BRD Commercial Bank, the initiative means more business for financial institutions and sustained economic development.

"Investing in securities and bonds as an assurance for resources that can be used to finance the kind of infrastructure projects government has earmarked in the budget,” Bugingo told Business Times on the sidelines of the meeting.

Some firms have already listed shares on the stock exchange, for example, and therefore this will only be a continuation of what we are already doing for sustainability purposes, he added.

Digitising tax systems

David Karuletwa, the Chief operating officer, RSwitch, said government will be able to raise the required resources if only it continues to promote new technologies to ease tax administration.

"It is obvious that government and the Rwanda Revenue Authority would want to keep track of all records and performance, especially as it draws more people into the tax net,” Karuletwa argued.

"However, for this to happen, you need to digitise the tax system to make it more efficient so that taxpayers do not find hurdles while filing tax returns...this will promote  compliancy.”

Road maintenance tax timely

Karuletwa added that the new levy on fuel imports and road maintenance which is expected to fetch Rwf8.6billion and Rwf5.2billion respectively is designed to ensure proper sustainability of the kind of infrastructure government is putting in place.

Wasteful expenditure

Meanwhile John Bosco Rusagara, the chairman of Rwanda Shippers Council, said there is need to reduce wasteful expenditure by some government agencies to be able to raise the required resources to fund the budget.

"Yes, you can say this budget is pro-people, however there is need to establish proper resource management systems to help minimise wasteful expenditure.”