Rwanda Revenue Authority says it has recovered Rwf1. 217 billion ($1.4million) from tax defaulters with 70% of it being illegal trade of imported second hand clothes locally known as ‘Caguwa’.
Rwanda hiked prices on second hand clothes in the fiscal year 2016-2017. The ultimate goal is to end trade of second hand clothes by empowering the textile industry sector in the region.
Despite high taxes on these clothes, however, Senior Supt. Alphonse Businge, Commanding Officer at the Revenue Protection Unit (RPU) says tax defaulters have established new tactics of smuggling the clothes.
The revenue protection unit discovered that bundles of second hand clothes are concealed in rice, maize and cassava flour sacks.
“We are able to know all these tricks because of the good partnership with the people,” said SSP. Businge.
RPU is attached to Rwanda Revenue Authority (RRA) to fight fraud and smuggling, among others.
Government hiked taxes on second hand clothes from $0.5 to $2.5 per kilogram.
According to SSP. Businge, more than 80 tons of second hand clothes were intercepted between February and May alone.
“Besides caguwa, other commodities like Ibitenge – African batik– soft and alcoholic drinks especially expensive liquors, cooking oil, powdered milk and vehicle spare parts are other commodities that are commonly seized,” SSP Businge said, attributing the success to information from the people.
The continued crackdown intensifies, Businge says.
“We have intensified operations, checkpoints along mapped routes but also increased awareness which has strengthened our working relations with the people through information sharing, either from the loading points even in neighboring countries where the illegal practices are orchestrated or at the final destination where they are noticed as they are being off-loaded.”
The RPU chief warned traders, who attempt to evade taxes by under-valuing goods or manipulating electronic billing machines.
Emmy Mbera, the coordinator of Electronic Billing Machine (EBM) in RRA, appealed to the public to always demand receipts owing to the fact that taxes or Value Added Tax is paid by the end user – the buyer.
“The end user is the one who pays VAT not the seller; the seller is just like a broker between the buyer and the government. If the buyer doesn’t demand the receipt, then he or she is not sure if their financial contribution in national development has been delivered.
Eddie Kalinda – a liquor supplier from Kicukiro central market says tax evaders have pushed down his clientele; “We have experienced a diminishing number of liquor buyers at our shops since the last two years. Consumers prefer buying from those who smuggle them at cheaper prices. We want Rwanda Revenue Authority to keep momentum and hunt these tax defaulters. They are a burden to our progress.”
Article 24 of the law on VAT, obliges all registered taxpayers in Rwanda to acquire and use EBM to issue invoices to their customers on every transaction they make.
Failure to comply is a tax crime that attracts penalties. The same law states that any person required to use EBM but sells goods or services without issuing an electronic invoice faces a fine ten times the value of the evaded VAT.
In article 200, any person with non customed goods shall be liable to an imprisonment not exceeding five years or a fine of 50 percent of the dutiable value of the goods involved, or both.
In September last year, the revenue body named 25 companies involved in Rwf6.8 billion tax fraud.
Under the East African Community Management Act, in article 199, the driver caught for fraud or smuggling goods, is slapped a fine of US$5000 while the vehicle and the goods are auctioned.
Currently, RRA is auctioning vehicles and goods that were intercepted in such fraudulent acts, over the past years.
Owing to the fact that the City of Kigali constructed seven modern health centres at a tune of about Rwf1.9 billion, it means that the recovered taxes can construct about five other health centres.
Robert Mugabe, the Deputy Commissioner for Revenue Investigation and Enforcement Department, said that the increased operations by RPU have significantly minimized on revenue losses by deterring, detecting and preventing smuggling, and tax evasion.