The Business community has cited the tax collection procedure as more of a concern than the existing rates arguing that the current tax enforcement system, including heavy penalties on payment delay, has a negative impact on their operations. ALSO READ: RRA announces deadline for tax payment They exposed the problem last week during a consultative meeting between the members of the Private Sector Federation (PSF) and the Ministry of Finance and Economic Planning (MINECOFIN), as well as Rwanda Revenue Authority (RRA). The session focused on taxes, and fees charged by Rwanda Revenue Authority and local government authorities. Here are some of the major tax issues that they said need to be addressed: Hefty penalties on tax payment delay Eugene Semigabo, first vice Chairman in charge of trade at PSF in the City of Kigali, said that through observation, he realised that tax rates in the country are not too high, rather the problem was in the enforcement by RRA to recover taxes. For instance, I had 10 plots of land for which I had to pay taxes. On the last day of tax declaration, the system was not working well. I finished making the declaration at night. And, when I went on to pay the due taxes, I could not do that because banks had closed. It was 5 pm. The next morning, a fine was already imposed, he said, indicating that he later had to pay Rwf3 million in additional taxes (tax fines). Semigabo argued that if a person does not have the means to pay the due tax, RRA will move to close his/her bank accounts. We are traders, you have to trade money so that it generates income for you to be able to live and pay taxes. If your accounts are closed, the Rwanda Revenue Authority does not gain, and the trader's business is severely impacted, he said. He suggested that if someone owes RRA taxes, the latter should facilitate the trader to pay it in a way that does not bring the business to a standstill. ALSO READ: Penalties on late tax payment could be slashed by 50% Inaccurate valuation of imported goods Imported goods are taxed based on their value -- how much they cost. A trader, who only identified himself as Anaclet and deals in hardware including construction materials argued that the value of imported goods at customs offices is, sometimes, inaccurate, a situation that is costing traders. He said that he imports most of the products from Asia – including Dubai and China. However, he expressed concern that, in the tax system, the values of goods that the customs agent considers are goods of a similar type, but imported from Europe, which are relatively more expensive than those from Asia. “For instance, I import Fujita sanders (from Asia). When I bring them to Kigali and reach the customs office, the agent looks at the value in the system and finds the values for a Bosh sander, which is a product from Europe, he said. “The problem is that this makes us pay tax for the expensive products from Europe that they have in the system, yet we imported a product from China or Dubai, which is relatively cheap,” he said, calling for the updating of the product and value update, because imports are not limited. Taxes condensed in a short period - the need for installments Local administrative taxes are paid in two months, in December and January which is a short period according to traders. These include trading license, land and building taxes. They said that this is a concern for them as there are those who do not have means to pay the due taxes within that period. We suggest that the period be extended such that trading licence tax be paid in March, while land and taxes on rental income from buildings be moved to June, and payments in installments should be considered to facilitate businesspeople, said Jeannette Mukamurenze, owner of Kesha Urugo Enterprise which trains domestic workers and helps them get employment. The Director General of Fiscal Decentralisation at the Ministry of Finance and Economic Planning (MINECOFIN), Emmanuel Kubwimana, said that the tax payment in installments is possible, but it should be done in a way that eases the obligation for the taxpayer, at the same time helping the country to mobilise the resources it needs to run its operations, including development projects. ALSO READ: Govt mulls changes to land, corporate tax rates Taxes on buildings built through loans If a business person constructs a building through long-term loans -- such 10 or 20 years --, they start paying tax on both the building and the plot of land on which it is built. Businesspeople said that for such projects, they spend like five years struggling, and start getting some income after that period. Indeed, they argued, such a building is a 'bank collateral', and the investor should pay taxes after repaying the bank loan as that is when they will have full rights on it, or at least after some years. Some even proposed that the Government can lower the tax rates as long as the bank loan is not yet paid off.
