News Column

Winners and Losers in 2014/15 National Budget

June 16, 2014

Ben Gasore

Sugar and bread lovers are some of the winners in the 2014/15 financial year budget presented to Parliament by Finance and Economic Planning Minister Amb. Claver Gatete on Thursday.

According to the Rwf1.75 trillion budget, wheat imports will be tax exempt compared to a 35 per cent levy importers foot in the current fiscal year.

The move is huge relief to the local confectionary industry that has complained about the high cost of wheat for a long time. It will also reduce the cost of doing business, as well as make bread and other wheat-based products affordable to the ordinary Rwandan.

A kilogramme of wheat costs between Rwf600 and Rwf750, with over 160,000 tonnes of wheat being produced locally per year.

As a way of reducing pressure on Rwanda's sole sugar maker, Kabuye Sugar, the government scrapped the 100 per cent tax on sugar imports. Kabuye Sugar produces about 30 per cent of Rwanda's sugar market needs. Presently, a kilogramme of sugar costs between Rwf600 and Rwf1,200 in retail shops and supermarkets, respectively. The tax exemption should give businesses that use sugar as raw material and ordinary consumers a breather. Gatete also cut the tax on imported unprocessed rice to 45 per cent from 75 per cent.

However, the over 64 per cent Rwandans who own mobile phones were not as lucky as excise duty on airtime increased to 10 per cent, up from 8 per cent this financial year.

Speaking during a post-budget press conference yesterday, Gatete said the move aimed at harmonising the tax rate with other East African Community (EAC) member states which introduced the levy this financial year.

"We agreed in 2011 on how we could gradually increase excise duty on airtime to 10 per cent. Actually, we were supposed to increase it last year but the industry wasn't fairing well, so we postponed it to this year," he explained.

Telecom companies, however, say the increase will hurt efforts aimed at increasing access to mobile phones and Internet.

"This will definitely affect the industry... Subscribers, who ultimately foot the bill, are price sensitive, and the move will affect penetration levels, too," said Teddy Bhullar, Airtel Rwanda managing director in an earlier interview with The New Times.

Gatete said the government is studying micro and small enterprises to understand their operations and how they could be taxed without hurting their businesses.

"We are looking at increasing the number of taxpayers rather than rise tax rates," he said.

The Rwanda Revenue Authority has been tasked to scale up tax collections at the district level with the government projecting to raise Rwf906.8b of the next budget from tax revenues. Over Rwf1.08 trillion of the new budget will be supported by domestic funds.

Importers of semi trailers also gained handsomely in Thursday's budget as they will not be taxed compared to the current 10 per cent levy under the new Common External Tariffs (CETs) regime. Trucks which carry between five and 20 tonnes will be paying 10 per cent tax, down from the current 25 per cent, while trucks that transport goods of more than 20 tonnes will be tax exempt in the next budget year.

Gatete said the move seeks to promote the local logistics industry and make it competitive in the region.

In a move targeted at encouraging public transporters to buy bigger buses, Gatete cut the import levy to 10 per cent for buses with sitting capacity of less than 25 and scrapped taxes on those that can sit over 25 passengers.

Cement taxes have been reduced from 35 per cent to 25 per cent to boost the local real estate sector.

Commenting on the new budget, John Bosco Kalisa, the TradeMark East Africa acting country director, said the budget focused on trade creation instead of trade diversion for the country at both the regional and international level.

He said the reduction in the tariffs were a move aimed at enhancing the welfare of the public since the tax burden is always passed onto them.

"We still heavily depend on imports for products like sugar and rice, if the taxes are high, it means the people get the products at higher prices," Kalisa explained.

He added that the reductions would on the other hand urgeRwandan producers to enhance production to satisfy market demand.

Kalisa said the tax cuts on transport vehicles will enable more Rwandans to own trucks and compete favourably with other truckers in the region.

He said they were still pushing for the government to allow Rwandan truck owners buy right-hand drive trailors which are less expensive as they are imported from Japan compared to the European left-hand drive trucks that are second-hand and expensive.

"This would enable more people to own trucks, reducing the costs of transportation and, ultimately prices of goods," he said.

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Source: AllAfrica

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