The lower chamber of parliament has approved a draft law providing for property tax where the rates were reviewed upward.
If the law is ratified as it is, Rwandans will start paying a property tax equivalent to 1% of the value of their property.
This marks an increase from 0.1% that has been in place for the last seven years, a move which aims at increasing financial resources of districts.
The increase was approved after the parliamentary economic commission presented a proposed amendment in the law determining the sources of revenue and property of decentralized entities ‘property tax’ on August 2.
The amendment affects the law No.59/2011 enacted in December 2011.
The draft bill suggests that the tax regime increase to 1% will be gradually implemented in the next four years with 0.25%, then 0.5% and 0.75% in the second and third year respectively.
The Minister of Finance and Economic Planning Dr. Uzziel
The retreat proposed the review of the land tax law to promote efficient land use and increase district revenues to enable them provide basic infrastructure and services to citizens.
“Currently districts heavily rely on central government transfers of 90% of their finances. This limits their ability to cater for local priorities, thus the law will improve district resource and promote business,” Ndagijimana said.
The new tax will only affect those who have accumulated additional property, not their first residential house.
All Rwandans planning to start a business will not be obliged to pay an upfront patent tax for 12 months as it has been the case.
The farming land of less than 2ha will not be required to pay this tax and so will government properties donated to vulnerable groups and immovable property belonging diplomatic missions.
Members of parliament voted for the proposed bill which has 68 articles after a heavy debate.
Longest serving MP Juvenal Nkusi said that the law would create more social pressure and tax evasion.
“This tax will be a burden. If people have not been paying when it was low how do you expect them to pay when it’s ten folds higher,” Nkusi said.
Nkusi and other MPS suggested that there should be a flat tax on properties and alternatively the tax property only once as is in the case of when one is purchasing a vehicle.
Defending the bill, parliamentary committee chairperson Constance Mukayuhi Rwaka, said that they have conducted a research on 35,000 properties which confirmed the relevancy of the law.
Minister Ndagijimana said it’s not easy to predict the revenues to come from this segment but added; “What we are sure about is that the law will generate more revenues.”
Rwanda Revenue Authority is expected to collect about Rwf1.22 trillion at the end of 2017/2018 fiscal year surpassing their annual target by Rwf20 billion.