PRE-BUDGET : Private sector still backing tax reforms in ahead of new budget

Rwanda’s nascent private sector is still vigorously pushing for tax reforms in the next financial year that begins next month. This is being done as a way of easing, doing businesses and support growth around the country. For the fourth time in a row since the private sector started presenting their issues directly for consideration tax related issues continue to override. “The Business Community is concerned by the new law on Value Added Tax (VAT) after revising the current law,” reads in part the sector’s position paper presented to the Senate in May by the Private Sector Federation (PSF).According to the business community, the new VAT law will cover among other factors, payments made by vouchers, gambling taxation, reverse charges especially on international transport, post sales adjustmentsand introduction of electronic registers. “The concerns are mainly on gambling and VAT reverse charge on international transport that was waived on July 2009,” the paper says. While the Value Added Tax (VAT) reverse charge on international transport was waived in July last year, the private sector says the new VAT law according to the budget framework paper seems to be re-instating it.The business community is proposing a general principle on gaming tax that includes having all prizes tax free, or small prizes are tax free and larger prizes are taxed at a higher rate to facilitate the gaming industry. “A flat gaming tax should be applied the gaming tax rate is to be set from 5 percent and increase progressively as per the revenue grows and market feedback,” The private sector also wants government to sign double taxation treaties with the European Union and East African Community countries as well as the USA, China and India. Currently, Rwanda has double taxation treaties with only three countries namely South Africa, Mauritius and Belgium. Yet the country imports many services from several countries mainly the United Kingdom, Holland, German, USA, China, India and EAC countries. “This is leading to huge losses due to double taxation,” the private sector says.This occurs when the recipient countries to where the management fees are transferred do not have a double taxation treaty. They also proposed a reduction of excise duty rate on beers with significant local raw material content from 60 percent to 20 percent. The law requires all car importers to pay 15 percent of withholding tax on airfreight, sea freight and inland transport, the business community has proposed that the road toll charges and other related charges be increased for international registered vehicles. The business community has again proposed that customs bond insurance premiums be harmonized with the EAC counterparts in order to create a level playing field. Rwandan companies charge between 3 percent -5 percent while their counterparts in the region charge between 3 percent to 1 percent. The business community also requested government to remove VAT on Gas (LPG) in order to enable cheaper prices to their clients. “It is the wish of the private sector that the 2010/11 budget focuses on the most daunting challenges including institutional capacity building, entrepreneurship development, energy, road infrastructure, cost of capital, export development with a focus on new niche sectors,” the paper says. Key issues addressed from the Federation’s position paper last year include, harmonization of tax policy to the East African Community (EAC) common external tariff and the removal of Value Added Tax (VAT) reverse charge on foreign transporters. Ends