We will negotiate with tax defaulters before cracking the whip - RRA boss

For the past two years, Rwanda Revenue Authority (RRA) has tightened its nose on tax defaulters. The tax body has closed down businesses and penalised those not fulfilling their tax obligations. The process has seen the tax body recover over Rwf19.8billion in tax arrears in the last 6 months. The arrears collected total tax revenues mounting to Rwf19.8bn compared to Rwf11.3bn collected in July-December 2014. According to Richard Tusabe, the RRA Commissioner General, the tax body is working around the clock to make sure they meet targets for this fiscal year. With only less than 6 months remaining Tusabe is upbeat, RRA will meet its targets. He talked to Business Times’ Peterson Tumwebaze on what is being done to make sure the tax body meets its targets. Tusabe says, they have adopted a new approach that is business friendly and will increase tax compliance. He says, the revenue body will now negotiate with defaulters and have them sign contracts under which they can pay their arrears without having to close them down. Instead of closing down businesses, we want to negotiate and have the defaulters sign agreements so they can pay their arrears as they work, Tusabe said. The tax body collected Rwf470.6 billion surpassing its earlier set target of Rwf460.3billion for the first half of the year, what is the driving force behind this performance? We have intensified and conducted numerous registration activities all geared at broadening of the tax base. And through these activities, we were are able to focus on specific sectors including commercial houses for VAT purposes, garages, and car washing bays, private schools and driving schools. And as a result, the total number of taxpayers increased by 7.4% by December 2015 compared to statistics in June 2015. We also intensified Electronic Billing Machine (EBM) monitoring and usage and because of the campaign the number of those using EBMs by December 2015 had reached a total of 9,966 reflecting an increase of almost 23.1 per cent in just a period of 6 months from 8,096 by June 2015. More actions were equally undertaken to encourage taxpayers to use electronic billing machines including putting in place a strong EBM monitoring team and field visits, Identifying VAT registered taxpayers, who had declared a positive turnover but did not have EBM. We have therefore been monitoring big importers, restaurants, bars and supermarkets to ensure that merchandise leaving has the EBM receipts. The revenue body has also invested heavily in sensitization of key stakeholders and the general public to improve their understanding on tax matters and improve taxpayers’ compliance. Many traders especially the SMEs still complain of high taxes and penalties levied on EBM, how is RRA handling the issue? We are aware of the fact that we need to facilitate our businesses especially the small and medium enterprises to grow because when they thrive and expand, they are able to contribute more revenues to government. We also understand that businesses come first before taxes; so it is in this regard that government has been creating a more conducive business environment not only to attract investors but also to give an opportunity for businesses to thrive. We are trying to be more accommodative and negotiate with traders so that they can pay their taxes voluntarily without any tax penalties. The World Bank and other international agencies have projected a global economic slowdown; how does this play out when it comes to taxation and meeting your targets. When you look at some of the factors that impacted on the revenue collection in July-December 2015, they include the slowdown in the average rate of economic growth since the financial crisis. And although the average tax buoyancy has actually increased, reflecting more efficient tax collection, inflation picked up to 3.5 percent in July-December 2015 from 1.0 per cent in July-December 2014, as had been projected which impacted on tax collection affecting the VAT turnover by at least 14.6 percent, from 16.1 percent in July-December 2014. The fall in global mineral prices and the VAT Zero rating policy on mining sector has equally led to much lower taxes from the mining sector than the same period of 2014/15. For example, there was higher than anticipated increase in CIF values, as a result of significant exchange rate depreciation. This exchange rate depreciation accounts for approximately Rwf9.4 billion of the Rwf18.3 billion nominal increase year-on-year. Customs duties also benefited from a greater increase in non-EAC imports. RRA workers closing one of businesses over not paying taxes. (Doreen Umutesi) What about the companies that recently laid off workers like Aortal and Tigo Rwanda, how has that affected revenue collection? It has a great impact, because it simply means a reduction in pay as you earn (PAYE). And although the overall PAYE performed well in July-December 2015, there was variation across sectors. The good performance of PAYE in the construction sector has offset the poor performance of PAYE in the telecommunication and education sectors. Equally, low public spending in July-December 2015 led to lower revenue from withholding taxes. What are some of the key challenges the tax body faces in trying to meet its targets? One of the main challenges is the refusal by some taxpayers to use Electronic Billing Machines as required by law; this has affected and still affects the amount of VAT collected. For example, there are cases of understatement of prices on most of the goods sold by taxpayers that use EBM, non issuance of EBM receipts and unacceptable refund. There is still existence of noncompliant taxpayers where they declare/file tax returns, but refuse to pay due taxes, until they are enforced. Some business operators still undervalue their goods during import the clearance process, which in turn negatively impacts on revenue collection. What are the key priorities as you look forward to meeting your targets? We have a tax revenue target of Rwf507.46 billion for the 2nd semester 2015/16: This includes RRA tax revenue equivalent to Rwf494.16 billion and the local government tax of Rwf13.3 billion. In addition, non-tax revenue target for Semester 2, 2015/16 is Rwf23.5 billion consisting of non-tax revenues of Rwf5.88 billion and local government fees amounting to Rwf17.6 billion. What will it take to achieve this target? RRA will continue to focus on taxpayers’ registrationto bring more new taxpayers on board especially those in informal businesses. The aim is to continue widening the tax base but also enhance EBM monitoring. We will also conduct enforcement for all VAT registered taxpayers in order to mobilize them to use EBM as required and to encourage buyers to always request for EBM receipts at every point of purchase. Organizing periodical VAT lottery (Tombola) is another approach to encourage buyers to request for EBM receipts whenever they buy a product or service remains our priority What about the enforcement measures to collect tax arrears? It will be through a continuation of sensitisation and education campaigns reminding taxpayers to fulfill their obligations relating to tax information, especially, the use of online facilities available for registration, filing and payment of tax and non tax revenues, local government taxes and fees will be a big milestone in our quest to meet the targets. We also want to carry out taxpayer registration by identifying all unregistered taxpayers while we while we implement automated system for local government tax management. editorial@newtimes.co.rw

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We will negotiate with tax defaulters before cracking the whip - RRA boss