A taxpayer convicted of fraudulent tax refund could be liable to an imprisonment term of between two years and five years, and to a fine equivalent to 100 per cent of the amount unduly claimed, a new bill has proposed.

The provision introduced to punish taxpayers who illegally request any tax refund, is intended to avoid fraud, the Government said in the explanatory note of this new draft law amending the law of 2019 on tax procedures.

"A taxpayer who fraudulently claims tax refund commits an offence. If convicted, the taxpayer is liable to imprisonment of a term of not less than two years and not more than five years and to a fine equivalent to one hundred percent (100%) of the amount unduly claimed,” reads of the articles of the bill.

According to the Rwanda Revenue Authority (RRA), tax refund is the reimbursement made when taxes withheld on earnings are more than what a person owes in income taxes for a calendar year – or when a taxpayer pays more than what he/she is required to pay.

Also, when an individual/taxpayer receives a tender from organisations/institutions that are exempted from paying value added tax (VAT), he/she deducts the VAT as provided for by the law, then thereafter files in a refund request to RRA.

RRA Commissioner General, Pascal Bizimana Ruganintwali, said on Wednesday, January 11, that the value added tax (VAT) or any other tax is not the funds for the businessperson, rather money meant for public interest.

He was speaking to journalists after the session on analysis of the bill by the Committee on National Budget and Patrimony.

"It is money that belongs to us all. I can say a person who commits VAT fraudulent acts, is like a thief who breaks into my house and steals my possessions,” he said, indicating that such people should be punished in accordance with the law.

"We will put in place mechanisms that allow taxpayers to pay taxes with ease, but those who want to steal or evade taxes should not be tolerated because it is a major issue that must be dealt with,” he said.

Giving some figures, Ruganintwali indicated that RRA used to retain 10 per cent of the VAT collected so that it is used for refund, but it was realised that such a rate was not enough to cover the reimbursement requests by all the concerned entities.

Later, he said, it raised that percentage to 12 per cent.

"Because we realise that many people are changing behaviour on paying VAT as it should, ... it increased gradually such that currently, we owe over Rwf30 billion that needs to be reimbursed to taxpayers,” he said.

MP Omar Munyaneza, Chairperson of the Committee on National Budget and Patrimony said that as VAT is paid by consumers, it should be effectively managed for public good.

"This (punishment against VAT refund fraud) is a way to tell people that such money should be put into the national treasury so that it is used for the development of citizens,” he said.

Some other changes in the bill

Among other changes in the bill, the retention period for books of account is extended from five to 10 years starting from January 1 of the year following the tax period to which such books relate. This is intended to harmonise the draft law with other laws, including those governing partnerships, trusts and foundations.

Meanwhile, administrative fines imposed on a taxpayer who declares tax due in the time limits provided by law, but who does not pay it in the prescribed time limits, were reduced by half to facilitate taxpayers overcome hardships (assuming that the taxpayer faithfully has declared tax on time).