MPs and civil society organizations are advocating for the automation of the proposed value-added tax (VAT) reward system for consumers who request electronic receipts. The suggestion was put forward during the analysis of the draft law on value-added tax by the Parliamentary Committee on National Budget and Patrimony on Wednesday, July 5.
The new bill includes a provision that introduces a reward for consumers who request and receive electronic invoices or receipts from electronic billing machines (EBMs). The specific value of the reward and the conditions for eligibility will be determined by a Ministerial Order.
The current lack of a clear policy to incentivize consumers to request electronic invoices has prompted the move towards automation. The Ministry of Finance acknowledges the need to enhance compliance with the obligation for traders to issue electronic invoices. Instances have been reported where consumers were encouraged by traders to obtain electronic receipts with lower values than their actual purchases or were asked to pay additional amounts for receipts reflecting the accurate purchase value.
The Director General of Tax Policy at the Ministry of Finance, Abel Ntegano, said that factors that informed the initiation of the new provision include cases where some consumers reported they were told by traders to get electronic receipts with a lower value than the purchased goods or to pay more money if they wanted electronic receipts with the actual value of their purchases.
For the consumer to get the award, he/she has to present an electronic invoice for the purchased goods or services to the tax administration body, according to article 27 of the bill.
Some MPs wanted to know how consumers would show the receipt to the tax administration, rooting for technology to ease work for them.
“Since we are in the digital era, why can’t that (rewarding of final consumers for electronic VAT receipts) be automatic by establishing a system that enables that, without putting a burden on me that though you have bought this bread, you have to dial Rwanda Revenue Authority number to inform them,” said MP Pierre Claver Rwaka.
The policy and legal coordinator at Transparency International Rwanda, Colette Ndabarushimana said “This incentive is commendable because it will make the citizen understand the benefit they have in paying tax and requesting the receipt.”
She recommended that there should be a technology-enabled system for a consumer to declare the electronic receipt and get their reward, such as on the telephone by dialing given numbers and signs that would be user-friendly for even people in rural areas.
On the concern on how the reward will be offered, the Commissioner for Legal Services and Board Affairs at RRA Aimable Felix Majyambere, Commissioner at Rwanda Revenue Authority (RRA) implied that it will be by means of technology.
This, he said, would be done such as by registering the consumer’s phone number in RRA’s electronic billing system (EBM) system, and the amount of his/her purchases and related electronic receipts, and then it will calculate the rebate based on the VAT reward percentage that will be set.
The development follows the enactment of the law on tax procedures which was published in the official gazette on March 31, 2023.
According to article 88 of the tax procedure law, a person registered for VAT who sells goods or services without issuing an electronic invoice is liable to an administrative fine of 10 times the value of the evaded VAT.
In case the fault is repeated within a period of two years, the defaulter is liable to an administrative fine of 20 times the value of the evaded VAT, it added.
VAT as top contributor to revenues
Meanwhile, in the financial year 2021/2022, VAT was the top tax contributor for Rwanda as it generated over Rwf593 billion, which represents 32 per cent of more than Rwf1,852 billion total tax revenues that RRA collected in that financial year, according to data from its 2021/2022 annual report.
It was followed by the PAYE (pay as you earn or tax on employment income that is withheld by employers on behalf of their employees) with Rwf427 billion, and profit taxes including corporate income tax (CIT) and Personal Income Tax (CIT).
