This article by Romal Sanjeeda, Bálint Ván and Harshil Parekh was originally published in TaxDev (21 May 2024)
The Rwandan Ministry of Finance and Economic Planning (MINECOFIN) published its sixth tax expenditure report in May 2024. This report builds on the previous years’ analyses and primarily covers estimates of revenue foregone from tax reliefs offered under the Value Added Tax (VAT), Corporate Income Tax (CIT) and import duties, the main types of tax expenditure (TE) in Rwanda.
VAT tax expenditure is estimated at Rwf 248.6 billion, income tax expenditure at Rwf 50.5 billion, and import duties expenditure at Rwf 258.8 billion. Overall, total tax expenditure increased by 23.6% (Rwf 104.9 billion) compared to 2021/22, representing a total of 29% of tax revenues in FY 2022/23.
Before 2022/23, VAT expenditure was the largest contributor. However, customs duty expenditures have now overtaken VAT as the largest share of tax expenditure. This rise is mainly attributed to increased imports of industrial inputs by investors, which are subject to reliefs, and the Stays of Application on specific products like sugar, wheat, and rice, which temporarily hold these items at lower tariff rates than those prescribed under the East African Community (EAC) Common External Tariff (CET).
During the past 5 years the TaxDev team has provided technical support to MINECOFIN and RRA to develop the methodology and analysis to produce the TE reports. This year due to staff turnover and new joiners TaxDev provided assistance in rebuilding and expanding the capacity for tax expenditure reporting. This resulted in more than 10 people from MINECOFIN and RRA working together on the report – a bigger team than ever before.
The full report can be accessed at: Rwanda’s Tax Expenditure Report 2022/23.