The government is set to introduce changes to its taxation system, potentially affecting over 10 products. According to a newly proposed bill being scrutinised in the lower chamber of Parliament, electronic cigarettes may be subject to new excise duties, while powdered milk and processed water will be exempt from taxation.

The bill will now undergo scrutiny by a responsible parliamentary committee before becoming law. The amendments aim to refine the existing law governing excise duty, which was initially established in September, 2019.

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Excise duty is a tax imposed on the production, sale, or consumption of selected products. Richard Tusabe, the Minister of State in charge of National Treasury in the Ministry of Finance and Economic Planning, presented the objectives behind the excise tax reform during a session with lawmakers on Thursday, June 9.

One of the goals is to encourage the importation of high-quality products, such as wines and liquors, aligning with the strategy to promote upscale tourism in Rwanda known as the Incentives, Conferences, and Exhibitions (MICE) strategy. Additionally, the reform aims to support local manufacturing by exempting powdered milk and industrially packed water from taxation.

Consequently, once the bill is enacted into law, powdered milk and industrially packed water will no longer be subject to the existing 10% tax rate.

Tusabe explained the reasoning behind this decision, stating, "We are striving for self-sufficiency in powdered milk production. We have a factory in Nyagatare, which is expected to start operations this August. Therefore, we believe that reducing the tax from 10 percent to zero will help us grow the factory while lowering the cost of nutritious food provided to pregnant women and children."

Regarding wines, the proposed bill suggests maintaining the current tax rate of 70%. However, Tusabe noted that the tax would not exceed Rwf40,000 per liter of wine.

He reasoned that reducing the tax burden on wine imports would facilitate an increase in the number of high-quality products entering the country, making them affordable for both local residents and tourists.

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Under the new bill, brandies, liquors, and whisky with a local raw material content of at least 70% by weight, excluding water, will be subject to a 60% tax rate. This rate represents a 10% decrease from the current 70% tax.

The adjustment aims to boost domestic production and create employment opportunities for Rwandans. However, brandies, liquors, and whisky that do not meet the 70% threshold will continue to be taxed at a rate of 70% or up to Rwf150,000 per liter.

The proposed bill also introduces a 160% tax rate for cigars and similar products, aligning with the government&039;s objective of safeguarding public health. Additionally, electronic cigarettes (e-cigarettes) may face a charge of Rwf30,000 per unit, while cartridges containing liquid for use in electronic cigarettes could be subject to a tax of Rwf24,400 per unit. Tusabe justified these measures by stating, "Cigarette consumption is evolving with technological advancements," and he further noted that users of electronic cigarettes tend to be relatively affluent.

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The World Health Organization (WHO) has warned about the potential health risks associated with e-cigarettes. WHO states that e-cigarette systems heat a liquid to produce aerosols that users inhale. These e-liquids may or may not contain nicotine but often contain additives, flavors, and chemicals that can be harmful to people's health.

In addition to the aforementioned changes, the bill proposes taxation rates of Rwf322 per kilogram for sweets and chewing gum, and Rwf1,930 per kilogram for chocolate.

Tusabe informed lawmakers that these items are not essential products needed on a daily basis by the Rwandan population.