Land and property owners are relieved after the government moved to put on hold earlier announced increased taxes on land and property that left many worried about their affordability.
A cabinet meeting chaired by President Kagame on Tuesday reviewed the decision, suspending the new taxes.
The law determining the sources of revenue and property of decentralized entities, commonly known as Property tax, passed by Parliament in August 2018 and was supposed to come into force in July 2019, increased tax on immovable property, land tax increasing from the initial regime of Rwf80 per square meter to Rwf300 per square meter, reflecting an almost 275% increment.
In his end of year press conference that followed the state of the nation address, on December 21, 2020, President Paul Kagame directed government officials to consider a review on the planned increase on the land tax regime after the issue became a contentious one.
Many said they would not afford the taxes under the new regime which more than quadrupled what they were initially paying.
On Wednesday, while appearing on the public broadcaster Rwanda Broadcasting Agency (RBA), the Minister of Finance and Economic Planning, Dr Uzziel Ndagijimana said that the government had put on hold the new regime.
Minister Ndagijimana, who was accompanied by the Director General of Rwanda Revenue Authority (RRA), Rugenintwali Pascal, said that the 2020 land tax will be paid based on the standard rates used in 2019.
“The deadline for payment of the land tax has been extended until April 30, 2021. For those who had paid taxes using revised rates, the extra amount will be considered during the next tax cycle,” Dr. Ndagijimana explained.
Following many public complaints and President Kagame’s directive, Minister Ndagijimana said that the government would go back to the drawing board to see how the issue can be reconsidered, in the wake of the New Coronavirus pandemic, which affected incomes of many.
“Yesterday’s cabinet decision was informed by the fact that Covid-19 affected the lives and incomes of many and therefore could not afford the new rates. Under these circumstances, the end of March deadline has been extended to the end of April, so that people have enough time to pay,” Dr. Ndagijimana said.
The issue has raised several debates, especially in the media, with the likes of Transparency International Rwanda country urging the government to reconsider the regime and in the context of the economic status of citizens.
Bosco Niyirora, a resident of Gasabo, said that for a plot of land he used to pay a tax of Rwf22, 000, under the new law he was supposed to pay Rwf167, 000.
“I could not find that money. The small houses I have on the land cannot generate that amount and I am old and sickly to work for that money. I am relieved,”
“I was waiting with hope that the government would reconsider, now they have. This is great news to us. I know many people in my age bracket who were not going to afford the new tax,” the 62, year old said.
President Kagame was asked by Salton Niyitanga, a local leader in Kimihurura sector, Gasabo district, stating that landowners in his area had raised concerns over the matter.
Niyitanga asked the President to use his judgment to resolve the matter. President Kagame, who had previously supported the changes, said the government would revisit the issue, in light of the current economic situation, in light of the pandemic.
President Kagame said that while the spirit and objective behind the changes was legitimate, the concerns of citizens should come first.
Previously, the MINICOFIN had said that the revised law was informed by recommendations of the 12th National Leadership Retreat which proposed the review of land tax law to promote efficient land use and increase district revenues to enable them to provide basic infrastructure and other services to citizens.
To justify the increment, the government had said that various studies conducted on taxation of property in Rwanda showed that Rwanda’s current fixed asset tax rate of 0.1% was too low compared to other countries in the region and beyond.
Studies further indicated that the top urban land tax bracket of Frw 80/square meters was very low compared to the real market values. Under the new law, tax rates for residential buildings would rise after exempting those used by owners as their residence.
However, many said they would not afford land and property tax under the new hiked rates.