How Rwanda is fighting tax evasion and smuggling

Charles Ndushabandi

For years now, Rwanda has lost billions of francs through tax evasion. However, over time the country has made significant strides in curbing tax evasion, in recent years this has been due government’s proactive measures to combat smuggling.

Rwanda shares porous borders with several countries, including Uganda, Tanzania, Burundi, and the Democratic Republic of Congo (DRC). The border points mainly of Uganda and DRC have become a hub of smuggling activities that often involve goods bypassing tax checkpoints and others brought in through porous borders.

One of the latest measures the government has come up with is to work with partners Feed the Future Rwanda Trade Facilitation Activity (RTFA – Boneza Ubucuruzi) project that was launched early September 11.

RTFA – Boneza Ubucuruzi is a project by the Ministry of Trade and Industry, in collaboration with the US Government through USAID, the 4-year initiative, with a budget of $5 million (approximately Rwf 6.5 billion), aims to enhance the efficiency of cross-border trade by increasing the use of technology at Rwanda’s borders, allowing products to be promoted and processed faster which will promptly leave no room for smuggling.

Jackie Zizane, Executive Director of the Feed the Future Trade Activity (RTFA), says the goal of the project is to support and boost cross-border trade. She expressed confidence that within four years, the barriers hindering traders will be eliminate leaving no room for tax evasion.

“The issues related to tax evasion and goods smuggling are practices we aim to eradicate. It will take the collaboration of all those involved in import and export businesses, along with cooperation from relevant government agencies and neighboring countries, to overcome these obstacles,” Zizane said.

According Alexis Ntakandi, a cross border trader at Rubavu, there is hope the project will offer a long standing solution to long-standing challenges in customs that have facilitated tax evasion and smuggling.

“When the system is down, work stalls. Even though the government has provided us with internet access, slow speed continues to be a problem. When work stalls a vacuum is created which is exploited by smugglers as the people on the other end are in need of these goods,” Ntakadi said.

Accordingly, observers have said that by removing barriers faced by traders this will benefit the private sector, the Rwandan Government, and citizens.

In order to curb the smuggling vice Rwanda Revenue Authority and Revenue Protection Unit (RPU) the National police have intensified operations to curb smuggling goods mostly second hand clothes commonly known “Caguwa” as they make up 70% smuggled good into Rwanda according to police.

In 2018, Rwanda increased taxes on second hand clothes to $4 per kilogram from previous$2.5 per kilogram but due to a number of reasons including durability and affordability they have continued to sell like hot cakes in the country hence police enhancing operations.

“The operations are also targeting markets and shops and interception of vehicles carrying these good to Kigali. Previously, much efforts were put on entry points but owing to the fact that most smugglers use porous borders and in most cases destined for City of Kigali and other markets,” said the police spokesperson

Also the Rwanda has constructed several cross border markets around border areas this has helped curb illegal trade among the neighboring communities across the border.

According to the law a taxpayer, who commits fraud, is subject to an administrative fine of one hundred percent (100%) of the evaded tax.

With exception to that penalty, the Tax Administration refers the case to the Prosecution service if the taxpayer voluntarily evaded such tax, like through the use of false accounts, falsified documents or any other act punishable by law.

In case of conviction, the taxpayer can be imprisoned for a period between six months and two years.

Article 87 of law N? 026/2019 of 18/09/2019 on tax procedures states that a person who, while intending tax evasion, commits one of the following acts: use of forged documents in his or her accounts;  counterfeit and use of documents or materials of the tax administration used for taxation; hiding taxable goods or assets related to business;  making a declaration indicating that the taxpayer has not made sales;  changing the trade name by a person prosecuted in relation to tax;  fraudulent registration of trade under the name of another person;  hiding accounting documents from the tax administration or damaging them; use of forged accounting records; commits an offence of tax evasion.

Upon conviction, he or she is liable to imprisonment for a term of not less than two (2) years and not more than five (5) years.