A new number plate scam has emerged in recent weeks costing the tax authorities revenue as a section of car importers use foreign number plates to avoid paying taxes eligible for car imports.

The plates are mostly from neighbouring DR Congo.

The New Times understands that Rwanda Revenue Authority has closed in on the fraud and so far seized 25 vehicles owned by Rwandans but fraudulently bearing foreign number plates violating motor vehicle regulations.

How it works

The New Times understands that the fraud is occasioned by a section of Rwandans who import vehicles purporting that they are destined for DR Congo but end up in Rwanda.

The cars mostly imported from Asia and often luxury models are usually allowed a transit regime to DR Congo via the Rusumo border.

The vehicle owners however secure Congolese number plates for the cars as well as entry cards despite never leaving the country.

With that, the vehicles remain in the country without having to pay taxes vehicle imports are subjected to.

Investigators who have been looking into the issue disclosed that the scam is especially common among importers of expensive vehicles which attract high taxes proportional to the cost of the cars. The cars are usually right-hand drive.

The cars that have been seized were imported from Asia and received a transit regime from Rusumo border to Congo. However, importers noticed that it would be difficult for them to re-enter Rwanda with Congolese number plates due to border closure as part of the measures to curb the Covid-19 pandemic.

To work around the closure of borders, importers would acquire DR Congo number plates and place them on the cars in Rwanda which is a violation of the customs regulation. Customs regulation requires a vehicle in transit to exit the country, get registered and can only return after registration.

Eligible taxes

Imported cars are eligible for taxes based on their customs value. Among the categories of taxes include customs duties (25 per cent), value-added tax (18 per cent), consumption taxes (5 per cent, 10 per cent or 15 per cent) depending on the engine power, infrastructure development levy (1.5 per cent), African Union levy (0.2 per cent), withholding tax (5 per cent) and registration fees which ranges between Rwf250,000 and Rwf350,000.

These taxes are often equivalent to the value of the car in its source markets.

The New Times understands that RRA has opened further investigations to gain insight on the entire operation to close in on the tax evasion avenue.

The New Times understands that RRA is also engaging Congolese authorities in the investigation process with the outcomes to determine consequences for involvement in the cases.

The investigations will among other things reveal persons who have been aiding in implementation of the fraud.

For the vehicles so far seized, they are considered restricted meaning that some could be handed over to Congo or destroyed.

While importing cars has become relatively easier with the rise in popularity of e-commerce platforms that allow buyers to reach sellers often without the need of an agent, sector enthusiasts say that the costs of the entire process have gone up in recent years under a new tax regime.

An East Africa Community protocol increased taxes on older cars to discourage dumping of old cars on the regional market, most of which had an adverse impact on the environment.

With that, East African states decided to have the harmonized depreciation rates starting 2015 in a move to cut down on carbon emissions from old cars which go on to have diverse effects on the environment, particularly damaging the ozone layer. For instance, for vehicles 10 years and older, the depreciation is at 80 per cent.

Alphonse Mutabazi, a Kigali-based automobile dealer involved in imports told The New Times the move by authorities to reign on the scam was timely as it will also enable legitimate dealers in the sector to remain in business.

Mutabazi said that such scams unfairly reduce costs incurred by car owners as it dodges taxes making it hard for legit and law-abiding operators to stay in business.

In 2018 Rwanda’s car imports stood at 7055, up from 7,000 in 2017, dominated by second-hand vehicles. In 2018, customs figures show that the country imported 10,576 motorbikes. The figures do not reflect car imports made by government agencies. A majority of the imported cars are second hand owing to their affordability.