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Are High Taxes Discouraging Start-ups In Rwanda?

Business

Are High Taxes Discouraging Start-ups In Rwanda?

There have been complaints from people claiming that high taxes are responsible for discouraging business start-ups in Rwanda from growing. They also demand that those taxes be removed.

In particular, research conducted by the National Institute of Statistics in Rwanda (NISR) in 2014 revealed that 50% of financial institutions and investors make losses before they become resilient.

Business experts prove that high taxes are one of the things than can discourage a startup businessperson hence forcing them to abort their operations without reaching further.

Some of the taxes according to the law No 59/2011 of 31 December 2011 are paid by startup and grownup businesspersons include the patent, rent, tax on fixed assets, and tax on other person’s income.

Others say that these taxes constitute a barrier for startups.

This problem was also discussed when the deputies from the National Budget and Patrimony Committee in the parliament held discussions with the Ministry of Trade and Industry  (minicom) Africa.

They analysed the bill of law setting the national budget for fiscal year  2018/2019 and budget framework paper 2018/19 and 2020/21.

Deputies asked Minicom about the measures in place regarding informal traders who make losses after a short time in operation as a result of high taxes. They asked this ministry whether these traders’ industries cannot be facilitated so as to develop.

Deputy Théobald Mporanyi said that “There is a problem among small businesses and cooperative startups. You will find that someone starts a business hoping to develop trade by starting their business. Someone joining BDF or Sacco is given 500000 Frw.

When they come together and work for two months, taxes claim the capital and it becomes a barrier.

He added that “They used to request us that if it is possible, Minicom and Rwanda Revenue Authority could work together to resolve that issue. Again, there is a problem they used to encounter where these people who run small shops were requested to have TN Number to register their business.”

“I wonder how you connect them […] those things go in line with the sector’s level where people set up a small shop but there are too many taxes. Taxes for security, hygiene, and for the sector.”

He said that people complain for investing like Rwf200000 and the money is lost in those taxes. He recommended that there should be a solution for those businesspeople so that they do not give up.

Responding on the measures in place, Minister of Trade Vincent Munyeshyaka, said that there are tax laws which are going to be reviewed

He said, “The taxation law is being revised to see how some taxes can be put together, when people talk about the patent, customs and others, this is something that is being considered. I think it will come up with a solution in the year we are going to start.”

In the national budget for the fiscal year 2018/19 of about Rwf2443.5billion for, Minicom has Rwf23 billion that will focus on developing business and industries, especially by building industrial zones, markets for cross-border trade, among others.

Rwanda already has initiatives to facilitate new investors, particularly the annex of law No 06/2015 of 28/032015 aiming at developing and facilitating investment. According to the law, a startup investor is assisted by 50% of the taxes on the facility they need.

Rwanda Development Board (RDB) states that so far those who invest in agriculture, garments made in Rwanda and mining, importing the facilities in that investment is exempted and those who want to export goods made in RWanda are exempted with a reduction in tax from 30% to 15%.

In 2017, World Bank in the Doing Business Report ranked Rwanda 2nd in Subsaharan Africa and 41st globally.

Meanwhile, over the past 15 years, Rwanda made 52 business reforms being the biggest number c reforms done in sub-Saharan Africa.

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