In the budget 2012/2013, SME tax regime new policy groups all SMEs in two categories and applies new tax rates as follows:Small enterprises with a turnover of Rwf2 million to Rwf50 million will now pay a flat tax rate of 3 per cent instead of 4 per cent per annum that has been prevailing. Micro enterprises with a turnover of Rwf12 million or less are now grouped in four bands and will pay taxes as follows; between a turnover of Frw10, 000,001 to 12,000,000, tax payers will pay taxes totalling to Frw300, 000 per annum. This reduces to Rwf210, 000 as taxes if the turnover is between Rwf7, 000,001 to Rwf10, 000,000 and will further reduce to Rw120, 000 if the turnover is between Rwf4, 000,001 to Rwf7, 000,000 per annum.The tax regime is facilitating small taxpayers and these will pay Rwf60, 000 per year as taxes if they achieve an annual turnover of Rwf2, 000,000 to Rwf4, 000,000.This is a significant facilitation of SMEs as it will become easy to conduct Self Assessment Returns (SARs).A 2008 PSF study estimated that there are over 72,000 SMEs operating in Rwanda, while only 25,000 of them are formally registered.Rwandan small and micro businesses comprise 97.8 per cent of the private sector and account for 36 per cent of private sector employment. They often lack proper accounting and financial systems.Rwandan medium sized enterprises, by contrast, are well-established businesses that are individually or jointly owned. They have set administrative processes, qualified personnel and trained staff, employ between 50-100 people and account for 0.22 per cent of businesses in Rwanda, contributing 5 per cent of total private sector employment. Combining these categories shows that SMEs comprise approximately 98 per cent of the total businesses in Rwanda and account for 41 per cent of all private sector employment.In the event all these SMEs pay taxes as indicated above, it will contribute significantly to achieving government revenue targets.Although, it was not elaborated on how the investment code will be revised, it is clear that the investors who have been enjoying capital allowances of 40 per cent (when investing in Kigali City) and fifty per cent when investing outside Kigali will be affected. The revision is estimated to yield revenue totalling to Rwf5.2 billion.Numbers of days for VAT evaders are numbered. With the introduction of Electronic Sales Register (ERS) for recording taxpayers’ transactions, no tax payer will claim VAT input tax without showing an invoice with ETR number. Government estimates to collect Rwf10.9 billion as a result of this facility.As a measure to increase revenue and tap into areas that have not been efficiently taxed, Government is introducing gaming tax yielding revenue of Rwf1.0 billion. Increase of wages and salaries will lead to increased PAYE tax and Government is projecting to collect Rwf9.3 billion in revenue.Regarding the application of the Common External Tariff (CET), it was agreed to stay application for Rwanda for a period of one year (FY 2012/13) on the following products:Rice: CET of 35 per cent (instead of 75 per cent), tractors of carrying capacity of 10 tonnes and above: CET of 10 per cent (instead of 25 per cent), trucks carrying capacity of 20 tonnes and above: CET of 0 per cent (instead of 25 per cent); wheat flour: CET of 35 per cent (instead of 60 per cent); wheat grains: CET of 0 per cent (instead of 35 per cent); road tractors and semi-trailers: CET of 10 per cent (instead of 25 per cent); importations of  telecommunication equipments: CET of 0 per cent and construction materials for investors with projects of at least US$1.8 million: CET of 10 per cent (instead of 25 per cent for most of the construction materials).Rwanda also proposed the review of CET rate on electricity and energy from 10 per cent to 0 per cent because electricity is an essential good and instrumental industrial input. This review has been favourably welcomed by all the five EAC countriesAngello Musinguzi is a Tax Manager at KPMG Rwanda