Understanding decentralised taxes

A few weeks ago Rwanda Revenue Authority (RRA)was given the responsibility of collecting taxes that were hitherto being collected by local governments. This was after the tax body and local authorities (districts) signed memorandum of understanding so RRA could collect the taxes on their behalf. The deal specifies the responsibilities of either party in ensuring that collection of the decentralised taxes is streamlined and no burden is shifted onto the taxpayers. Also, the decision to transfer decentralised taxes to RRA was made by a joint committee of experts from RRA and its partners and aimed at easing the taxation process and increasing efficiency in tax collection. Besides, RRA is technologically and financially well-equipped to collect taxes and revenues compared to local authorities. The taxes that are collected by RRA on behalf of districts are rental income tax, which is a tax levied on the amount of money collected by a landlord from a tenant or group of tenants for using a particular space; trading license tax; and property tax, a tax assessed on real estate by the local government. It is usually based on the value of the property, including the land (you own). In order to facilitate transition from manual to IT-based tax payment, RRA will continue to administer collection of such taxes at a sector level, where a taxpayer will declare tax returns and deposit the money due in any Bank of Kigali branch or its agents in that sector. After a taxpayer will be issued with an RRA receipt by the officer at the sector upon presentation of a bank receipt. RRA is optimistic that with its IT infrastructure, all taxpayers will benefit from the online declaration and payment of taxes regardless of their turnover, location or size of business, using e-filing and e-payment, mobile declaration through the use of mobile telephones. This is hoped to increase tax compliance. The writer is the head of media and customer relations at Rwanda Revenue Authority.

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Understanding decentralised taxes