The move by the government to reduce or scrap taxes on selected categories of motor vehicles will encourage economic activity and spur growth, Herbert Gatsinzi, the Ernst & Young director for tax advisory services, has said. The government reduced common external tariffs on motor vehicles for transport of goods with between five tonnes and 20 tonnes capacity to 10 per cent, down from 25 per cent in the 2013/14 financial year budget.
The move by the government to reduce or scrap taxes on selected categories of motor vehicles will encourage economic activity and spur growth, Herbert Gatsinzi, the Ernst & Young director for tax advisory services, has said.
The government reduced common external tariffs on motor vehicles for transport of goods with between five tonnes and 20 tonnes capacity to 10 per cent, down from 25 per cent in the 2013/14 financial year budget. Duty on buses for transportation of over 50 persons was also cut to five per cent, down from 25 per cent.
The reductions followed consultations by East African Community (EAC) member states ministers of finance recently.
Taxes on motor vehicles for transport of goods, with compression-ignition internal combustion piston engine (diesel or semi diesel) with gross vehicle weight exceeding 20 tonnes were scrapped.
"This is good news for the transport sector, but also for Rwanda as a landlocked country. Generally, reductions in this area mean low cost of production since transportation of goods and services will be easy,” Gatsinzi argued during a 2013/14 budget review breakfast meeting organised by Ernst & Young at the Kigali Serena Hotel on Tuesday.
Road tractors for semi trailers will no longer be taxed, while duty on buses that transport over 25 persons was cut from 25 per cent to 10 per cent.
Stephen Sang, the Ernst & Young senior manager on assurance and advisory business services, noted that the move would drive other sectors of the economy since transport is a major player in production.
Gatsinzi, however, pointed out that the 25 per cent common external tariff imposed on building materials for local investors with a minimum capital of $100,000 in hotels and 10 per cent for projects worth over $1.8m could slow down the construction sector. "Unless someone (at the legislative level) explains clearly who will pay this tax, it might cause confusion among investors,” he noted.
The construction industry was one of the major drivers of economic growth last year, growing at 15.2 per cent.
Gatsinzi also noted that the 25 per cent duty imposed on imported telecommunication equipment might affect the telecom sector.