High penalties imposed on traders and businesses that are found not using electronic billing machines (EBMs) have caused uneasiness among the business community. Business leaders say defaulters pay up to Rwf20 million in fines for not using the e-billing machine or evading Value Added Tax (VAT). 

They say these fines are hurting businesses as the penalties are far too high compared to what most enterprises earn. While meeting in Kigali on Wednesday, the traders called on the government to intervene to review the law to make it business-friendly.

The penalties are under Law Nº 02/2015 of 25/02/2015 Modifying and complementing Law N° 37/2012 of 09/11/2012 establishing the VAT law articles 6 and 7 which covers issues on non-compliance with the EBM law.

This is the second time in as many years that the business community is complaining about the law.

EBMs were introduced by RRA in 2012 to ease tax collection and help monitor business operations, especially in the auditing entities in terms of taxes to be paid and operations made. However, traders have since been complaining about fines imposed on defaulters.

The penalties according to Andre Bitwayiki, the president of the Private Sector Federation (PSF) in the City of Kigali, are unfair and make the business environment less competitive.

"We are not advocating for the removal of the fines, but we want fairness in the way the law is implemented,” he said.

Bitwayiki was speaking during a dialogue on electronic billing machine penalties organised by the Private Sector Federation in Kigali on Wednesday.

He added that some traders may be forced to close business if the law is not amended.

"Business collapse would negatively impact the trader, and the revenue collector who is seeking to expand the tax base,” Bitwayiki noted.

Stephen Ruzibiza, the PSF chief executive officer, said the dialogue aimed at engaging traders on how the matter should be resolved as the federation prepares to approach the Rwanda Revenue Authority (RRA).

"Traders are calling for equitable penalties which are realistic and encourage tax compliance,” Ruzibiza told The New Times.

RRA speaks out

Meanwhile, RRA has said it is ready to engage the traders basing on their recommendations (from the Wednesday dialogue).

"We is ready and willing to have a dialogue with them over the issue,” Richard Tusabe, said the RRA Commissioner General.

RRA said reluctance by some taxpayers to use EBMs law affects VAT collections.

"There are also still cases of traders who tamper with EBMs and alter prices on goods sold, which affects our tax collection targets,” Tusabe said.

More about the law

According to Article 24 of the law, any person required to use e-billing machine in his/her business operations and fails to use it, or intentionally damages it, shall be liable to an administrative fine as follows: Rwf20 million when his/her overall turnover is above Rwf400 million for each tax period; Rwf10 million when their overall turnover ranges from over Rwf50 million to Rwf400 million for each tax period.

For traders with businesses of Rwf5 million, mainly small-and-medium entrepreneurs, the fine is Rwf2 million.

The law, however, exempts taxpayers who do not issue 30 invoices annually, thus giving many micro and small traders a window to use other modes of tax payment

A total of 8,096 VAT-registered taxpayers had acquired EBMs as of June 30, 2015 reflecting a 67.9 per cent increase from 4,821 same period in 2014. Currently, there are over 12,000 VAT-registered taxpayers, 8,623 of whom have EBMs with the total number of the machines distributed at 10,054.

business@newtimes.co.rw