We already know that Rwanda is among the top in the region and on the continent when it comes to corruption-free governance and a fast-growing economy, and now we can add another accomplishment to the list: paying taxes.
The 2013 World Bank 'Doing Business' report has indicated that Rwanda leads the region in tax compliance.
According to the report, Rwanda ranks 25th out of 185 countries surveyed globally in compliance and ease in tax payments. Uganda follows at 93rd, Tanzania at 133rd, Burundi at 137th, with Kenya trailing at position 164th.
With only 17 payments annually, Rwanda leads the region in fewest number of taxes on businesses, followed by Burundi at 25, Uganda at 31, Kenya with 41, and Tanzania with 48 tax payments.
The report advised governments to not only choose appropriate tax rates within a broad based, fair and transparent tax system, but also to design a tax system which does not discourage taxpayers from participating through complicated schemes.
"Effective information exchange is essential to ensure the correct application of tax laws while maintaining sovereignty over the application and enforcement of these laws."
The report shows that Rwandans pay nine different taxes, but because they pay VAT and social security contributions quarterly, annual filings and payments are fewer for Rwandan businesses compared to its regional peers. Complying with taxes takes businesses an average of 134 hours a year in Rwanda, while in Kenya it takes 340--over double the time.
"Effective information exchange is essential to ensure the correct application of tax laws while maintaining sovereignty over the application and enforcement of these laws," the report noted.
The report indicates that the average number of tax payments in EAC economies fell from 36 in 2004 to 32 in 2011, while the average total tax rate dropped from 91.7% of profits to 42.2%. Over the same period, the average time for tax compliance increased slightly, showing the need for continued efforts to make tax paying easier.
The EAC bloc's average tax compliance ranking is lower than that of the Southern African Development Community (SADC), at 83, and the Common Market for Eastern and Southern Africa (COMESA), at 92.
In both of these regional blocs, which have overlapping memberships, rankings range from 12th for Mauritius to 171stfor the Democratic Republic of Congo.
Among EAC economies, Rwanda and Burundi have advanced the furthest in regulatory practice in paying taxes since 2004.
According to the report, the EAC has a significantly lower average total tax rate at 42.2% of profit than SADC at 52.2%, Comesa has an average tax rate of 65.1% higher than the overall sub-Saharan Africa which is 57.8%.
The report also shows that 16 economies have enhanced electronic filing, eliminating the need for 196 separate tax payments and reducing compliance time by 134 days in total. Seven other economies implemented electronic filing for the first time, raising the number offering this option from 67 in 2010 to 74 in 2011.
Rwanda enacted a new law in 2010, reducing the frequency of VAT filings from monthly to quarterly. The country has also implemented electronic filing and payment for taxpayers which has eased the issues of tax payment among taxpayers in the country since its efficient and effective compared to the previous years where taxpayers would make queues at Rwanda Revenue Authority offices around the country while paying their respective taxes.
