Widening tax base vital

Rwanda Revenue Authority (RRA) on Friday announced a 20 per cent increase in tax collection for the last nine months in comparison to the previous year. This was attributed to strong economic growth and easy payment system.The revenue body collected Rwf 419 billion between July 2011 and March 2012. Total revenues, including non tax revenue collected exceeded the target by 7.8 per cent to Rwf 428.4 billion. A better business environment and reforms in doing business are also acknowledged as having contributed to the higher revenue collections. However, it was observed that Rwanda’s revenue to GDP ratio is still low at 13.8 per cent in comparison to an average of 18 per cent in Sub-Saharan Africa.As was observed by the RRA head, the existence of a high level informal sector creates a problem of a narrow tax base. Commendably, the revenue body and other institutions have put in place measures to integrate the informal sector into the formal economy.Attracting more investments both local and foreign is one way that has been used to expand the economy and improve on revenue collection. Additionally, it is important that sensitisation is carried out to help those who still remain in the informal sector, to register their businesses and contribute taxes for national development.Besides educating such owners of businesses on the importance of paying taxes, there are numerous advantages associated with owning businesses that are fully registered. Access to credit is one of the advantages those who join the formal sector have and this creates opportunity for business growth.