Three leading food processing companies in the country have been exempted from paying Value Added Tax (VAT) for five years.

The move is aimed at making them competitive and also encourage more investors in the food processing sector.
They include Minimex, a maize processing company, Pembe Flour Mills and ICM-Rwanda, a rice processing firm.

Vincent Karega, State Minister for Industry and Export Promotion said the incentive is also to make more food available in the markets.

Processors upbeat
"Our sales will increase absolutely,” said Lambert Ngamije, Assistant Director General of Minimex.

Adding, "The informal sector goes untaxed and we find it difficult to compete since their prices are a bit lower.”
Rwanda Revenue Authority (RRA), however, says the Treasury will not be hurt by the Cabinet decision to waive the VAT.

Government had not planned to give tax holiday to these firms in the national budget.  Ben Kagarama, Deputy Commissioner of Domestic Taxes said, VAT was waived after the processors complained with the tax, sales were low. "But the impact won’t be very big since they were not paying much in taxes,” he said.

He added that, "Government is ready to forego the tax revenues in the interest of the ordinary Rwandan.” 

This means that processors are supposed to lower prices for their products because there is no VAT cost to be shifted to consumers. However, it is not likely to be the case in the near future as the dry season has began.

Currently there is scarcity of maize and the country is currently importing some from Tanzania to feed the local market.  Ngamije said that in just a period of five months, a kilogram of maize has increased from Frw100 to Frw230 while a 50 kilogram sack of maize flour moved from Frw10,500 to Frw17,000.

In this dry period, both farmers and traders say the prices will slightly go up, something that may make the VAT waiver have no impact on the consumers.  

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