How domestic revenues will fund 60% Budget

Government is confident that 60.2 per cent of resources needed to support its 2013-2014 Budget will be domestically generated without having to increase taxes.This is because the growing private investments in the country mean that more money is being collected in tax revenues, according to the Finance Minister.Amb. Claver Gatete told journalists during a post Budget news conference in Kigali yesterday that measures the government will put in place to effectively collect taxes as well as the number of current and upcoming private entrepreneurs create the ability to meet targets set in the next budget for domestic revenues.Rwanda’s total domestic revenues for the next fiscal year have been estimated at Rwf 994.9 billion which is 60.2 per cent of the Rwf 1.6 trillion Budget, leaving external resources to account for only 39.8 per cent (Rwf 658.6 billion).Over the last 13 years, Rwanda has significantly reduced its dependence on donor aid from 85 per cent of total budget to the current 39.8 per cent.According to the Rwanda Development Board (RDB), the country is targeting US$1.3 billion in foreign and local investments combined for the year 2013, up from US$1.1 billion in 2012.“Because of the increasing businesses in the country, we are seeing increment in taxes,” Gatete said, explaining that the government is targeting more tax revenues without having to change taxes.The minister said that tax laws and policies will be reviewed to enable the government to increase domestic resources. They will include the creation of an electronic tax collection system to increase the taxable base and mobilising people and government institutions to abide with tax laws.“The revenue projections for the 2013-2014 fiscal year do not envisage any substantial changes in the tax regime. However, they are underpinned by several on-going as well as new measures to be implemented by the Rwanda Revenue Authority (RRA) in fiscal year 2013/14,” Gatete said while releasing the country’s next budget on Thursday in Parliament.With the implementation of the government’s new revenue administration measures for 2013-2014 fiscal year, more consumers in the country will be paying electronically while more business owners will also be paying their taxes electronically.“Its introduction and implementation will reduce compliance costs for both tax administration and taxpayers,” Gatete said as he explained the importance of the electronic system.Those who are in charge of clearing goods on the country’s borders will also be using electronic systems such as the ‘Electronic Single Window’ which has been already launched and rolled out to different warehouses and other agencies involved in import and export clearing.Among other electronic technologies that will be introduced for effective revenue collection include electronic cargo tracking equipment to ensure the protection of cargo from source to destination and mobile technology in payment and filing of taxes.Experts project feasibility Most analysts interviewed by Saturday Times said the government’s plans to fund its next budget using domestic resources at more than 60 per cent is feasible if the electronic system for filing and paying taxes is well implemented.Prof. Josephat Bosire, a finance and investment lecturer at Mount Kenya University said the country’s positive economic growth means that there are enough entrepreneurs to pay the needed taxes.“Those entrepreneurs will increase the tax base,” he said, explaining that what the government needs is to ensure that laws governing taxes are respected.He also said that the electronic system should be able to help effectively collect revenues, citing Kenya where the introduction of the technology has brought about 30 per cent increase in the country’s tax collection ability in the last five years.The professor said the challenge may be in implementing the system and he advised that there should always be back up for data in case of failures.“Like all electronic systems, sometimes they may have malfunctions,” he said.Angello Musinguzi, a tax manager at KPMG - a global network of professional firms providing audit and advisory in tax services - agrees with the Prof. Bosire that the government will need to conduct a lot of trainings for local entrepreneurs and auditors if it is to succeed in its tax collection targets.“They will have to increase the number of Rwanda Revenue Authority auditors; staff capacity is low,” he said. “New investments are coming. There are sources of revenues there. I can see a lot of opportunities in the private sector. If they become aggressive in tax collection they can even surpass the targets,” he said.Agaciro Development Funds not touchedThe Finance Minister told reporters that funds that the government has raised through Agaciro Development Fund programme will not be used in the government’s budget but left to accumulate so that it can help Rwanda in the future.He instead said that the government has allocated Rwf 1 billion from the country’s budget to boost the Agaciro. He also noted that the government will reveal a plan before the end of this month to show how Agaciro funds will be invested in income generating projects for the purpose of growing the fund.“It’s not for consumption,” Gatete said of Agaciro funds.Rwf26 billion has been pledged under the fund, with Rwf 17 billion already paid.

National

How domestic revenues will fund 60% Budget