High Taxation in Rwanda Hinders the Growth of Startups

Taxation in Rwanda Hinders the Growth of Startups

The Rwandan government received complains about high taxation that hinders the growth of business startups in the recent past. People have gone ahead to demand the elimination of these taxes by the government. According to a research carried out in 2014 by the National Institute of Statistics in Rwanda (NISR), 50% of investors and financial institutions records lose before picking up. According to business experts, high taxations is one of the factors that discourage startup business owners. This forces them to shut down their operations before carrying out further research.

Law No 59/2011 of 31st December 2011 states that business persons and startups should pay different taxes. They include a tax on other people’s income, rent, tax on fixed assets and the patent. Some people argue that such taxes are hindering the growth of startups. The issue was also discussed during the parliamentary meeting between the National Budget and Patrimony Committee and the Ministry of Trade and Industry (minicom) Africa.

The two groups looked at the bill of law putting up the national budget for the financial year 2018/2019. It also discussed the 2018/2019 and 2020/2021 budget framework paper. Minicom was asked about the measures put in place to help informal traders who record losses after a short period of time due to high taxation. The ministry was asked if the traders’ sector cannot receive support in order to grow.  According to Deputy Théobald Mporanyi, cooperative startups and small businesses have got problems between them. He adds that there are those who put up a business with the hope of developing trade. Those joining Sacco or BDF do receive 500000 Frw.

The moment the two groups decide to put away their differences and work together for two months taxes eat away the capital and this becomes a burden. People used to request Rwanda Revenue Authority and Minicom to work together to do away with the issue. However, those who operated small shops were required to possess TN Number to register their businesses. This was another burden for them.  Those with small shops are entitled to too many taxes these are taxes for the sector, hygiene, and security.

Mporanyi added that people do complain about investing a lot of money and they get lost in the taxes in the long run. He added that there is a need for a solution for those suffering to help them keep moving in the running of their businesses. Vincent Munyeshyaka, the Minister of Trade talked about measures put in place by the ministry. He said that a number of tax laws are being revised to find ways on how some tax laws can be harmonized with others.

Rwf23 billion has been allocated to Minicom out of Rwf2443.5 billion that is in the national budget for the financial year 2018/19. The money will be channeled to developing industries and businesses. They will especially be used in putting up markets for cross-border trade, industrial zones and many more.  The country has already put up initiatives to assist new investors especially the annex of law No 06/2015 of 28/032015. It aims at putting up and improving investment. The law states that an investor of the startup is helped by 50% of the taxes on the required facility. According to Rwanda Development Board (RDB), investors in the agricultural sector, Rwandan made garnets and mining are exempted from importing investment facilities. It adds that exporters of Rwanda manufactured goods get a tax reduction of 15% from 30%.

World Bank ranked the country as the 2nd in Sub-Saharan Africa and 4th worldwide according to its 2017 Doing Business Report. In the last 15 years, Rwanda put up 52 business reforms. This is the highest number of c reforms to be put up in Sub-Saharan Africa.


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Written by Denis Opudo

Am an engineer who's a tech blogger, hit me up on [email protected] and we base our discussion on technology in Africa and the rest of the world.
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