Govt tables bill seeking to raise tax on telecoms services

Users of telephone communication services such as landline and mobile phones, internet, and other services may have to pay more in the near future if Parliament approves a bill that seeks to increase consumption tax on the services by the end of next month. Under a bill tabled in the Lower House on Wednesday, the government plans to increase the telecoms tax rate to 10 per cent up from the current 8 per cent effective July 1, 2014. The move would fetch government Rwf2 billion in the next fiscal year as part of Rwf906.8 billion expected to come from tax revenue to help fund the country’s Rwf1.7 trillion planned budget for the Financial Year 2014/15. MPs approved the basis of the bill in a plenary session where Trade and Industry minister François Kanimba appeared to explain the draft law. Kanimba was representing Amb. Claver Gatete, the Minister for Finance and Economic Planning, who was away on a business trip. The government’s explanatory note on the draft law says the increase was agreed upon with telecommunication companies in the country. The government had kept the telecoms tax at lower levels in previous years to attract investments in the telecommunication area, setting it at 3 per cent in early 2006, and raising it to five per cent and eight per cent in 2009 and 2010, respectively. The Government has, however, waived VAT and Customs duties on all telecommunication equipment and other related accessories. But it plans to increase excise tax to the telecoms next fiscal year. “To get rid of gaps in the national budget, it was deemed necessary to introduce a consumption tax rate of 10 per cent on telephone communications,” the explanatory note says. Prime Minister Pierre-Damien Habumuremyi, asked Parliament to urgently consider the bill on the increase of the taxes. That means that the legislators have just a couple of days to submit their comments on the bill and decide on whether to pass it into law before the execution of the national budget for the next fiscal year (2014/2015) kicks off on July 1, 2014. Out of government’s projected Rwf1.7 trillion for the National Budget for Financial Year 2014/15, total domestic revenue collections are estimated at Rwf986 billion, with Rwf906.8 billion expected to come from tax revenue, while Rwf79.3 billion will be derived from non-tax revenue. Consumers assured Minister Kanimba told MPs that the government had consulted telecoms companies and that they had agreed to have their excise tax increased. Richard Tusabe, the Commissioner General of Rwanda Revenue Authority (RRA), says the tax increase is too low to negatively affect consumers. “It’s a very minimal increase,” he told The New Times yesterday. But the country’s telecoms companies are yet to analyse the impact of the increase of the excise tax. Yvonne Makolo, the marketing manager of MTN Rwanda, said in a brief statement sent to The Saturday Times that the increase in excise tax will definitely have consequences. “The increase in excise tax from eight per cent to 10 per cent will have an impact on the business since it applies to all airtime services (both voice and data),” she said. Yasmin Amri Sued, the brand and communication manager for Tigo Rwanda, declined to comment on the issue, only promising that she would provide the company’s comments on the increase in the future.