Rwanda Revenue Authority (RRA) has announced plans to initiate a study that will help determine how much tax is lost due to tax non-compliance of multinational companies, particularly, those in the ICT sector.

The research is expected to enable the revenue body to devise means of addressing some of the gaps that have led to lower tax revenues declared by some multinational companies.

The development was announced by Ronald Niwenshuti, the Assistant Commissioner at RRA in charge of taxpayer audit while appearing on the state broadcaster in the current affairs show, The Square.

He highlighted that an informed decision to crack down on non-compliance in digital multinational companies would be addressed effectively courtesy of the study.

"For digital services, we are still in the initial stages as government through RRA has initiated a study to identify the losses we are making so as to come up with an informed decision to create a fitting legal framework that will guide effective taxation of these digital companies,” said Niwenshuti.

He further stressed that tax compliance is critical for development even if Rwanda is among the high-ranking countries to attract foreign investment.

Niwenshuti further noted that some multinationals tend to exploit weaknesses in the international tax legal frameworks to reduce their tax liabilities although government, through Rwanda Development Board, has clear investment codes that stipulate which sectors are entitled to which tax incentives.

"We have a very clear investment code, and within it, the government of Rwanda has prioritized certain sectors for which it has reduced tax rates. Even with the race to the bottom, there has been a priority to make sure that we don’t give away too much,” said Niwenshuti.

He also highlighted that the government has signed a number of treaties with various countries for effective and mutual tax regulation that favors both the country as well as multinational companies/taxpayers that trade within Rwanda.

In a separate interview, Roger Brugger, a consultant in taxation and other financial advisory services, commended the level of Rwanda’s efforts to regulate international tax practices.

Nevertheless, he also touched on some unavoidable "tricksters” who may take advantage of a few gaps.

He said that in addressing international tax issues, a strong regulator is needed, which in this case he said is the Rwanda Revenue Authority.

"I think for Rwanda, what’s happening at the moment is actually very good, we’re seeing a lot of Double Tax Agreements being signed; and this can actually facilitate more investments into the country and as long as the companies act in the boundaries of these agreements, then there is no harm for a country like Rwanda,” added Brugger.

Bugger also urged multinational companies to always consult the tax laws and regulations as well as tax advisory firms about international taxation in Rwanda.

Rwanda has so far ratified double taxation treaties with different countries including South Africa, Belgium, Mauritius, Singapore, Barbados, Jersey, Morocco, Turkey, UAE, Qatar, DRC Congo and China while more countries remain in the pipeline.

In August 2021, Rwanda also signed the Mutual Administrative Assistance Convention in Tax Matters (MAAC).

The MAAC enables the Tax Administration to exchange information for tax purposes with more than 143 jurisdictions.