Rwanda Revenue Authority, says the use of Electronic Billing Machines (EBM) tripled Value Added Tax (VAT) revenues in the past four years.
According to figures released by the tax body on Monday, revenues collected from the Value Added Tax (VAT) rose from Rwf10.5 billion ($12.047 million) in 2013 when the new technology was launched to Rwf352 billion ($404.4 million) in 2017.
Rwanda introduced the EBM machines and hundreds of users have been awarded for being compliant.
However, RRA says that there has been misuse of EBM by other business operators –becoming a hurdle for the tax body to efficiently collect VAT revenues.
Several VAT defaulters have seen their businesses closed while others faced hefty fines – a sign Rwanda Revenue Authority officials say serves as a lesson for non-compliant VAT payers.
Last week, EBM field Operations department closed 8 shops in the capital Kigali over non-compliance with VAT.
Officials say this was the second time in a row, the tax body is closing doors of businesses that abuse the use of EBM.
“Under valuation is the common method traders use to cheat on VAT.
In this case say a trader sells 25kgs of Kabuye sugar at Rwf18, 000, but when invoicing for VAT they reduce the price to Rwf16, 000. The motivation here is to maximize margins by adding the 18% of government tax to the normal profit. In other cases, EBM invoices are not issued at all,” said Jean Marie Vianney Butera, the EBM Field Operations Manager.
According to Butera, closure of business premises is an additional penalty to financial fines that put business of the offender at a disadvantage, yet it can be avoided by adhering to tax laws.
“Also, the vice affects law abiding businesses negatively as it kills fair competition,” he said.
The VAT law says any person required to use electronic billing machine that sells goods or services without issuing an electronic invoice is liable to an administrative fine of ten times the value of the evaded value added tax. And, in case a person repeats the fault, he or she is liable to an administrative fine of twenty times the value of the evaded VAT.
Statistics from EBM project indicate that 22,751 taxpayers use electronic billing machines and 19,508 of them use EBM version one while 3,243 use the upgraded version of EBM.
Rwanda’s budget for 2018/2019 is Rwf2, 443.5 billion, with 84% of it expected from internally generated revenues.