Dutch suspend aid: Rwandans should meet tax obligations

Recently the Netherlands government announced its decision to suspend aid to Rwanda, citing a strongly contested report of the UN which accused Rwanda of aiding a Congolese rebel group National Congress for the Defence of the People (CNDP). You cannot predict which country will follow. The cutting of aid should however, not come as a surprise. The rich nations have previously failed to honour their aid pledges. At the 2005 G-8 Summit in Gleneagles, Scotland, the former British Prime Minister Tony Blair won commitments of the great nations to double development aid to Africa by 2010. However, the media reported last year that ever since the great nations made the commitments-not even Britain had fulfilled them. The rich nations reneged on their commitments—greatly putting their credibility at stake. In another meeting of the G-8 officials, according to media reports, when the issue of the 2005 aid pledges was raised by British delegates, it was met with little sympathy. The May 16 2007 Guardian article, quoted a Russian delegate as saying, “We only made those promises because we felt sorry for Tony Blair after the terrorist attacks on 7/7,” in reference to the bombings of a bus and tube trains in London, which had recently happened. This is a clear evidence that there is no commitment to aiding Africa and no clear cut formula for disbursing aid. The rich nations do it at their own convenience. Therefore, with the so called rich nations cutting financial aid, it is time to mobilise domestic resources to cover the gap. This brings me to recent media reports that the Rwanda Revenue Authority (RRA) loses about Rwf1billion due to tax evasion. Tax evasion involves people who well knowingly refuse to honour their tax obligations. It’s a global issue, cutting across all economies and many governments experience the effects of this injustice. The taxman is a dreaded man. Even people with the financial muscle tend to dodge paying taxes. Most recently, MPs in neighbouring Kenya objected to subjecting their incomes to tax, you can imagine. What is disturbing is that in business, tax evaders often cut prices of their goods to get a bigger market share over those who honour their tax obligations. However, Rwandans should understand that it’s their duty to pay taxes if the government is to realise Vision 2020. Tax evasion has far reaching effects and RRA needs to address the issue with utmost urgency. The tax evaders will always keep their prices amazingly down to maximise sales, and due to competition, the honest traders may also be compelled to cut prices. The resultant price war leads to reduced profit margin-which may in the long run push companies out of business-causing unemployment. As the government strives to reduce donor dependence, as reiterated by President Kagame during this week’s press conference, tax evaders stifle this government’s dream. It is common knowledge that taxes are necessary for the government to provide social services like education, health care, infrastructure and help the vulnerable citizens-for Rwanda’s case Genocide survivors. The RRA revenue collection last year which surpassed their target is commendable. But there is need for a robust campaign not only to curb tax evasion but also broaden the tax base. The informal sector should be targeted as big tax avenue. Mass awareness campaigns should be conducted to sensitise people about the importance of paying taxes and the wider consequences of failing to do so. Ok, let us assume the news of tax evasion is not true. But it is through robust strategies that governments can effectively tackle tax evasion so as to increase revenue collection and broaden the tax base-otherwise the trickery of traders will always be there. This calls for zero tolerance against corruption which is known to abet things like smuggling which lead to loss of revenue. Rwanda is growing rapidly and there is no doubt that the country has the capacity to become self reliant. Rwanda has the right leadership to steer the country to growth. UN figures in 2007 rated Rwanda at 7 percent growth since the Genocide-only second to Mozambique at 8 percent since the civil war there 20 years ago. It is certainly through paying taxes that the dependence syndrome could be done away with. Perhaps President Kagame was saying just that, when he said, at the same press conference, that stand up to the challenge, while responding to a question from a journalist about the recent Netherlands government decision to suspend aid. Contact: jtasamba@gmail.com