The Minister of Finance, with powers granted to him by law, and following recommendations of a Tax Policy Committee of July 3, 2020, waived off tax penalties, late payments on interests due to hardships caused by the effect of COVID-19 pandemic in the months of March, April and May and corporate income tax of 2019. Subsequently, the ministry approved applications worth over Rwf5billion submitted by the Rwanda Revenue Authority (RRA).
This decision came after several other adjustments made to ease tax burdens on businesses. RRA Commissioner-General, Pascal Bizimana Ruganintwali spoke to Taarifa about the rationale behind recent fiscal measures taken, the effect of the pandemic on the tax basket, and plans in place to respond to the impact on the economy.
Below are excerpts.
What informed the decision by RRA to waiver taxes to some taxpayers?
Many taxpayers wrote to RRA requesting to be given a waiver on interest and penalties due to cash flow issues caused by COVID19. We were also noticing many declarations being made on different taxes but no payment was being made.
From your own assessment, what is the economic impact of such a decision?
At the moment, each and every sector of the economy was impacted by the COVID-19 pandemic albeit in varying proportions. Granting waivers was a deliberate measure of lessening the impact of COVID-19 on the economy by granting taxpayers an opportunity to recover and focus on stabilizing their businesses and remain afloat.
Were there some taxpayers whose applications were rejected? If yes, why?
All the businesses that were given a waiver, it was due to hardships they were facing in payment however not all businesses were facing this challenge because some continued to work during the period of COVID-19 lockdown. Therefore, all those that were rejected had no hardship issues since they did not stop working.
It is obvious COVID-19 has affected your initial tax projections …can you give us a picture of the effect and in numbers?
We ended last Financial Year with a gap of Rwf 74.2 billion. However, if we include the strong performance of the first semester (June-Dec 2019) where we had exceeded the target by Rwf 26billion, we can say COVID-19 impacted the tax collections by Rwf 100.2 billion.
What other tax burdens are you facing now and in the near future? If possible tell us how you intend to go about it.
Many challenges we are facing rotate around cash flow issues in payment of taxes, some businesses have just opened and are operating at a low percentage. Others are still closed. We know others have tax arrears that they cannot afford to pay. We have also noticed some layoffs of staff in some businesses. RRA is also aware of the complete closure of operations by some businesses.
All these cases affect tax collection in the short run and in the long run, however, we have put in place measures with the support of government to overcome this. First, the waiver for businesses in hardship to be able to pay the principal tax and continue to operate. We are also expanding our tax base by recruiting businesses that were not in the tax net before. RRA has also begun providing other facilities such as installment payments to businesses to be able to pay their tax liabilities in a long period.
Policy-wise, what new changes is RRA making in regards to the effects of COVID-19, apart from waivers?
RRA in conjunction with the ministry has had a mixed range of policies aimed at mitigating the effects of COVID-19 on business in general. One such policy includes the extension of due dates for different taxes like income tax. Another significant policy is to allow businesses to pay their Instalment Quarterly Prepayment (IQPs) basing on current year operations instead of basing on previous years. Some sectors have also benefited from exemptions on paying PAYE for employees earning up to Rwf150,000 (Tourism, hotels, and private schools). Taxpayers were allowed to declare without certified financial statements for a period of three months. Administratively, we expanded the use of online services to limit the movements of our clients. We also suspended the requirement of 25% downward payment admissible for amicable settlements.
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