Informal employment fueling tax evasion in Rwanda
Informal employment has been fueling tax evasion through nonpayment of income tax with the hospitality and construction sectors in Rwanda being the biggest culprits according to Rwanda taxman’s compliance survey.
Rwanda Revenue Authority (RRA) commissioner general Richard Tusabe while releasing the findings of the survey noted that many hotel owners have not been registering their employees which meant they didn’t declare and pay their respective Pay as You Earn tax, resulting in loss of revenue.
"We will penalise and close down construction companies and hotels that are not fulfilling their tax obligations," Tusabe warned. "Anybody found to have committed criminal offences will be prosecuted to deter and prevent any form of tax evasion by other taxpayers," he said.
Tusabe said there is high likelihood of large construction and hospitality companies utilising complex schemes to evade taxes.
To improve tax compliance in the two sectors, RRA will increase onsite visits, co-ordinate with industry associations, and improve its internal capabilities through consultative meetings with individual hotels based on the reports, Tusabe said.
During the 2015/16 financial year, the construction sector contributed $15million and hotels $10million, which Tusabe said was below the targeted revenues. He said RRA will introduce an online mechanism to be used by field officers for verification of workers that are making the payment of PAYE so as to identify the tax evaders.
RRA plans to achieve the set target for Financial Year 2016/17 where it intends to collect $1.3million (tax and non-tax), which is 55.6 per cent of the $2.4 million billion National Budget.
Tusabe said during 2015/16 fiscal year, RRA collected Rwf980 billion.
According to Pascal Ruganintwali, the deputy commissioner-general and commissioner for corporate services at RRA, the most effective way to gain and maintain voluntary compliance is through building a relationship of mutual trust and respect between the tax administration and taxpayers.
"We need to increase tax education and sensitise taxpayers on implications of non-compliance on their businesses and the economy generally," he said. Ruganintwali said revenue collector would simplify administrative procedures, as well as continue guiding taxpayers and motivating them to fulfill their obligations.
