SUSTAINING THE MOMENTUM - RWANDA'S 2019/20 NATIONAL BUDGET BULLETIN JUNE 2019 - PWC
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Sustaining the Momentum Rwanda’s 2019/20 National Budget Bulletin June 2019
In this bulletin… 1. Our Commentary 03 2. The Economy 07 3. Tax Amendments 18 4. East Africa Highlights 23 Sustaining the Momentum: Rwanda’s 2019/20 National Budget Insights and Highlights June 2019 PwC 2
Commentary
“Transforming lives through industrialisation and job
creation for shared prosperity” was the theme for the
budgets of all East African Community countries -
consistent with the previous year and the year before.
This theme also aligns with Rwanda’s Vision 2050
(ensuring high standards of living for all Rwandans) and
the seven year Government program (2017 to
2024)/National Strategy for Transformation 1 (which
integrates far-sighted, long-range global and regional
commitments that are geared towards transforming the
well being of citizens). This is commendable as the
budget talks to each of the three pillars of NST1.
In his budget speech, the Minister for Finance highlighted
numerous economic and social achievements,
opportunities and well as challenges. Amongst the
challenges highlighted were, higher than expected
inflation from imported products following increased
transport costs due to an increase in oil prices.
Sustaining the Momentum: Rwanda’s 2019/20 National Budget Insights and Highlights June 2019
Proprietary and confidential. Do not distribute.
PwC 3
Commentary
The Minister remains confident on Recently, there has been significant
both the prospects for growth, and debate in the media in relation to
for revenue collection. On growth, levels of Government debt; and
the Budget assumes real GDP more debate might be triggered
growth of 7.8% for 2019/2020 given a 2019/20 target for an Placeholder for image,
which is consistent with the recent increased budget deficit (3% of chart or graph
forecasts from the African GDP) as compared to 2018/19.
Development Bank and the IMF.
Whilst acknowledging that
The 2019/20 budget is FRW2,876.9 government debt has been
bn) which is an 11% increase on increasing, the Minister
the 2018/19 revised budget emphasized that the latest Debt
(FRW2,585.2 bn). The domestic Sustainability Analysis conducted in
revenue (including domestic April 2019 confirmed the
Placeholder for image,
financing) is assumed to contribute sustainability of the debt in the
chart or graph
68% of the budget which is still medium and long term. The focus
consistent with 2018/19 domestic should continue to be on having the
revenue contribution to budget debt ploughed in sectors that
which is a good indication that in generate productive growth and
coming years the budget will soon ensure its not only sustainable but
be largely domestically funded. there is sufficient cash for
repayment when it falls due.
Sustaining the Momentum: Rwanda’s 2019/20 National Budget Insights and Highlights June 2019
PwC 4
Commentary
A number of measures were
announced that sought to assist
domestic local grown solutions,
importantly, in an environment of tight
liquidity and a constrained consumer
pocket, for example the minister
Placeholder for image, chart or graph
stayed customs taxes on selected
goods to facilitate local manufacturers
and also ease inflationary pressures
on some of the basic goods.
On the tax front, the Minister did not
announce any major tax changes
apart from reaffirming the
The Minister plans to spend about This also seems to align with the government’s commitment to roll out
the Electronic Billing Machines (EBM
50% on recurrent expenditure and ‘Asian tigers’ who undertook the
for all) to all persons engaged in
40% on development expenditure. Is journey before and embraced a
commercial activities. This will require
this the right expenditure mix given the disciplined and prudent approach of the affected businesses to reflect on
country’s growth ambition? This borrowing for infrastructure projects how best to ready their processes for
seems to be in line with the region’s while funding recurrent spending compliance.
mix of recurrent and capital through domestic resources
expenditure.
Sustaining the Momentum: Rwanda’s 2019/20 National Budget Insights and Highlights June 2019
PwC 5
Commentary
Lastly we expected the Minister to For the taxman, the tax amnesty …given the
announce a tax amnesty as part of will provide additional revenue and
the ongoing measures to improved potentially widen the tax base in progress Rwanda
tax compliance. cases of previously unregistered
taxpayers. has made in
Such initiatives have proved
successful in a number of other This would certainly be an improving tax
jurisdictions in bringing reluctant opportunity to wipe the slate clean,
taxpayers in from the cold – and start afresh. We hope the compliance a tax
creating a win-win for the taxpayer, Minister can consider such a move
to able the tax payer formalize and in the near future amnesty is worth
correct past errors or omissions
without a cost of penalties. considering.
Sustaining the Momentum: Rwanda’s 2019/20 National Budget Insights and Highlights June 2019
PwC 6The Economy
Global
Global Economic Growth Beyond 2020, global growth is set GDP for World Economies
to settle at about 3.6%
According to the IMF’s April 2019
World Economic Outlook (WEO), According to the IMF, growth
6
global growth momentum slackened across emerging markets and
in 2018 to 3.6% from 3.8% in 2017, developing economies is projected 5 4.8
4.5 4.4
showing greater than expected to stabilize slightly below 5%. For
weaker performance in some some regions, the outlook is 4 3.6 3.6
convoluted by a combination of 3.3
economies, notably Europe and Asia.
structural bottlenecks, slower 3
The global economy is projected to advanced economy growth and, in 2.2
grow at an even a lower rate of 3.3% 2 1.8 1.7
some cases, high debt and tighter
in 2019 compared to previous years. financial conditions. These factors,
Global growth will start to level off in alongside subdued commodity 1
the second half of 2019 to achieve prices and civil strife or conflict in
0
3.6% in 2020 based on on-going some cases, contribute to Global Economy Advanced Emerging Markets
build- up of policy stimulus in China, unresponsive medium-term Economies and Developing
recent improvement in global financial prospects for Latin America; the Economies
market and, stabilization of conditions Middle East, North Africa, and 2018 2019 2020
and declining pressures on growth in Pakistan region; and parts of Sub-
the euro area and emerging markets. Saharan Africa
Source: IMF 2019 World Economic Outlook
Sustaining the Momentum: Rwanda’s 2019/20 National Budget Insights and Highlights June 2019
PwC 7The Economy
Africa
Sub Saharan Africa (SSA) Some 21 countries are expected to
2019 GDP forecast for selected Sub-Saharan
sustain growth at 5% or more in
African Economies
Sub-Saharan Africa’s (SSA) economic 2019. The remaining countries,
recovery is set to continue, but along two mostly other resource-dependent
tracks, after the region faced a decline in economies, including the largest -
global commodities price between 2015 Nigeria and South Africa - are set to
and 2016, tighter financial conditions and face slow growth in the near-term. Ethiopia
a strong US dollar in 2018. 7%
According to the IMF, addressing
GDP growth in SSA was 3% in 2018 these growing challenges within
compared to 2.9% in 2017 and is set to these countries requires building
pick up to 3.5% in 2019 and stabilize at fiscal space and enhancing Nigeria
Kenya
slightly below 4% over the medium term. resilience to shocks by stepping up 2.7%
6.2%
This is projected on diminished policy actions to mobilize revenues, Angola
Rwanda
8.6%
uncertainty and improved investment in alongside policies to boost 2.2%
large economies together with continued productivity and private investment.
robust growth in non-resource intensive
countries.
South Africa
1.8%
Sustaining the Momentum: Rwanda’s 2019/20 National Budget Insights and Highlights June 2019
PwC 8The Economy
East Africa Community (EAC)
According to the African Development GDP growth by region 2017 to 2020 significantly higher than the
Bank’s 2019 African Economic continental average.
Africa North Africa
Outlook, East Africa is the fastest
West Africa Central Africa
growing region of the continent with a The Continental Free Trade Area
robust GDP forecast of 5.9% from an East Africa Southern Africa (CFTA), launched in Kigali in March
estimated 5.7% in 2018. However, 7 2018, is the latest regional integration
the regional average is disguised by 6 initiative. The tripartite free trade area
5
substantial variation across countries. involving COMESA, EAC, and the
4
3 Southern African Development
The countries with the highest 2 Community was an important
economic growth are Rwanda, 1 motivation for the CFTA, especially in
Tanzania and Kenya. The region 0 East and Southern Africa.
2017 2018 2019 2020
however continues to face various (EST) (EST)
downside risks that could undermine Source: Africa development bank- East Africa These initiatives are believed to be
Economic Outlook
economic growth and development advancing regional integration in East
prospects. Major risks are Further, international trade on the Africa and will accelerate inter-
agriculture’s susceptibility to the continent remains low averaging at regional trade.
impulses of nature, heavy reliance on about 14.5% and roughly unchanged
primary commodity exports, rising oil over the past five years. Intra-EAC
prices, persistent current account trade is the highest among all
deficits and related increases in regional economic communities in
external indebtedness. Africa - above 20% of exports and
Sustaining the Momentum: Rwanda’s 2019/20 National Budget Insights and Highlights June 2019
PwC 9The Economy
Ease of doing business in the EAC
Ease of doing business score EAC countries have continued to
push the frontiers of reforms more
REGIONAL AVERAGE (RANK 119) 56.94
broadly. The World Bank’s 2019
Doing Business report showed the
SOUTH SUDAN (RANK 185) 35.34 progress made by sub-Saharan
Africa among reforming economies.
BURUNDI (RANK 168) 47.41
The 2019 report showed that the
TANZANIA (RANK144) 53.63 EAC has continued to excel,
accounting for one-third of all
UGANDA (RANK 127) 57.06
business regulatory reforms. In fact,
KENYA (RANK 61) 70.31
Rwanda and Kenya led the pack of
reformers.
RWANDA (RANK 29) 77.88
Despite these advancements
0 10 20 30 40 50 60 70 80 90 though, several EAC countries
Source: World Bank Doing Business Report, 2019
continue to lag behind.
Note: An economy’s ease of doing business score is reflected on a scale from 0 to 100, where 0 represents the
lowest and 100 represents the best performance. The ease of doing business ranking ranges from 1 to 190.
Sustaining the Momentum: Rwanda’s 2019/20 National Budget Insights and Highlights June 2019
PwC 10The Economy
Rwanda’s Economic Performance
Industry: The industry sector Services: The services sector
Key Economic Indicators grew by 10%, much higher grew by 9% mainly driven by
FY18/19 (est)FY19/20 than its 5 years’ average and a recovery in wholesale and
GDP growth 8.6% 7.8% accounted for 16% of the total retail trade and continuing
Total budget in FRW FRW FRW 2,876.9bn
GDP. Growth in industry was expansion of the air transport
2,585.2bn
Domestic Revenue % of GDP 16% 16.2% boosted particularly by the segment.
Expenditure % of GDP 28.5% 28% recovery in the construction
Headline Inflation 1.1 Est below 5% sector, which grew by 14%. Agriculture: The agriculture
Public Debt in USD USD41bn ? sector grew by 6% following
Domestic borrowing % of GDP 0.7% 1.7% The recovery in beverages & favorable weather conditions
Fiscal Deficit % of GDP (incl. -4.5% -6.3% tobacco and continuing good and various government
grants)
performance in textile/ measures to increase food
GDP Growth and its drivers clothing’s production also and other agricultural
contributed to the positive production.
Rwanda’s economy is estimated to grow by 8.6%
growth of industry despite the
by the end of the fiscal year FY18/19 which is
poor performance of mining,
1.4% above the government’s initial projected
target of 7.2%. Industry and services are the especially in the last quarter of
main contributors to this GDP growth. 2018.
Sustaining the Momentum: Rwanda’s 2019/20 National Budget Insights and Highlights June 2019
PwC 11The Economy
Rwanda’s Economic Performance
5.5%
Inflation Commercial bank lending and
Rwanda’s annual headline inflation deposit rates
for FY18/19 is projected to be below
the 5% medium term inflation In FY18/19, commercial bank interest
benchmark. As rising inflation is rates remained broadly stable and The main drivers of lending rates in
generally associated with currency have been converging towards the Rwanda are operational costs,
depreciation and exchange rate CBR as a result of improved liquidity provisioning for loan losses, the cost
instability, the decline in headline management. Commercial Banks’ of holding statutory reserves and the
inflation is a result of ease in lending rates and deposit rates National Bank Rate, currently at
exchange rate pressures and the slightly reduced, respectively standing 5.5%.
slowdown in annual food crops
at 16.96% (lending rates) and 7.51%
inflation due to increased agricultural
(deposit rates) in 2018, from 17.17%
production during the year. The
stability of FRW contributed to ease (lending rates) and 7.72% recorded in
the imported inflation despite the 2017 (deposit rates).
increase recorded in transport costs.
Sustaining the Momentum: Rwanda’s 2019/20 National Budget Insights and Highlights June 2019
PwC 12The Economy
Rwanda’s Economic Performance
The main reason for this Domestic debt is mainly
increase in the additional composed of government
external debt (3.9% of GDP), securities especially Treasury
which was meant to scale up bills together with Treasury
public investment projects that bonds (more than 75 percent
support trade and tourism. of total public domestic debt at
end FY2018/19).
The majority of Rwanda’s debt
is external (83.3%) and The country’s debt strategy is
predominantly composed of to maximize concessional
concessional loans (projected borrowing while restricting
to be at 61.6% of the total commercial loans to the
Public debt stock
portfolio at June 2019) mostly financing of infrastructure and
Rwanda’s external present value (PV) of debt-to- provided by multilateral self - financing projects.
GDP stood at 32.9% as of end 2018, an increase institutions.
of 5.2% from 27.7% PV of Debt to GDP as of end
2017.
Sustaining the Momentum: Rwanda’s 2019/20 National Budget Insights and Highlights June 2019
PwC 13The Economy-Fiscal Performance
Budget for FY19/20: Resource Envelope
Budgeted Domestic revenues for 19/20
Domestic Revenue Loans Grants Domestic Financing
Non-tax revenue
8%
11%
14% Taxes on The tax revenue of FRW1.535.8bn is
international
trade expected to come from, among
18% 60% 7%
Direct taxes
others, the continuing economic
38% growth momentum of 7.8% projected
Indirect for the FY19/20, and increase in the
taxes
44% taxable base that will be supported by
The Government plans to increase new tax administrative measures and
spending by 11% in the 2019/20 policies.
fiscal year to FRW2,876bn. Donors Total domestic revenue collections
will fund 14% of the budget (a 2% have been projected to reach FRW As regards economic growth,
decrease in donor funding) with the 1,726.2bn in the fiscal year 2019/20. • the agriculture sector is expected
rest coming from domestic revenue This is 9% above the estimated figure to get good performance in food
and debt. The total resources of FRW1,571.4bn to be achieved in and export of crops.
projected is made up of: the fiscal year 2018/19 by 9%. • The industry is expected to be
• FRW 1,726bn of domestic tax boosted by good performance in
and non-tax revenues (60%); Tax revenue will contribute 89% mining and construction activities
• external grants and loans of (FRW1,535.8bn of the total domestic • the services sector is likely to
FRW 409.8bn (14%) and FRW revenue [i.e. Indirect taxes (44%), maintain it performance at the rate
497bn (17%), respectively and Direct taxes (38%) and taxes on of 8% .
• a total domestic financing of international trade (7%)], and the
the budget deficit of FRW balance of 11% will be contributed by
237bn (8%).. non-tax revenue.
Sustaining the Momentum: Rwanda’s 2019/20 National Budget Insights and Highlights June 2019
PwC 14The Economy-Government Spending
With regard to the domestically
2018/19 2019/20
financed portion, the allocated amount
Billion Billion %change from
is to allow the implementation of
previous year
priority projects that will increase
Recurrent Budget 1,310 1,424.5 9% access to electricity, water and
Development Budget 1,041 1,152.1 11% sanitation as well as education and
Net Lending 190 244.1 28% health.
00%
Arrears payments 27.2 30 10% In the case of the foreign financed
Accumulation of Deposits 16.96 25.5 50% portion, the allocated amount is to
Total expenditure projected in the including creation of new structures in cover projects in the energy, roads and
fiscal year 2019/20 is mainly made up the public sector. agriculture sectors.
of FRW 1,424.5bn as recurrent
expenditure, FRW 1,152.1bn as Specifically, the increase in the Net Lending
allocated amount for wages will cater Outlays under net lending in the fiscal
capital/development spending and
FRW 244.1bn as net lending outlays. for restructuring of education and year 2019/20 have increased by 28%
health sector salaries including new from the previous year’s budget
Recurrent expenditure recruitments as well as increases in allocation. The increase in the
The allocated amount of FRW allocated amount is mainly for two
allowances of the security agencies.
1,424.5bn in fiscal year 2019/20 is significant spending areas:
9% higher than the allocated amount Capital expenditure i. funds for the recapitalization of
in the fiscal year 2018/19. Total capital spending in the fiscal BRD – which is going to be done
year 2019/20 has been estimated at over a three year period and
The increase in recurrent expenditure
FRW 1,152.1bn. This figure is made ii. funds to Rwandair to support its
is mainly driven by increased
up of FRW 694bn of domestically expansion strategy
allocations for both wage and non-
financed expenditure and BRD has been recapitalized to
wage related items arising from on-
FRW458.2bn of foreign financed promote accelerated private sector
going restructuring exercises
expenditure. growth.
Sustaining the Momentum: Rwanda’s 2019/20 National Budget Insights and Highlights June 2019
PwC 15The Economy-Sector Allocation as per NST1
Resource allocation to NST1 As priority area one under the social quality education ranging from
Pillars transformation pillar of the NST1, construction of classrooms
Education has taken the second countrywide, to in-house text books
The National Strategy for biggest share of the pie. Priorities production and distribution and
Transformation (NST1) is a under the education sector are to promotion of STEM subjects in
government strategy developed as an focus on improvement of access to primary and secondly schools.
implementation instrument for the
remainder of Vision 2020 and the first
four years of the Vision 2050. The
budget allocation to the three NST1 1,800
pillars is as follows. 1,600 57%
1,400
Sector allocation to NST1
1,200
Pillars 1,000
Once again, Public Finance 800 1,637 27%
Management (PFM) has taken the 600
16%
biggest piece of the pie (it has also 400 781
had the third largest increase in 200 457
budget allocation when compared to -
Economic Transformation Social Transformation Transformational
the FY18/19) as the Government Governance
continues to ensure that both the
external debt and project loans are
within acceptable limits.
Sustaining the Momentum: Rwanda’s 2019/20 National Budget Insights and Highlights June 2019
PwC 16The Economy-Sector Allocation as per NST1
% change from
Water and Sanitation had the largest Sectors as per NST1 FY18/19* % share FY19/20 % share FY18/19
increase in the budget allocation to FRW'bn FRW‘bn
the tune of 47% when compared to Public Finance Management (PFM) 657 27% 855 30% 30%
Education 273 11% 311 11% 14%
the current year. The increase is to Justice, Reconciliation, Law and Order 233 10% 268 9% 15%
enable: Transport 238 10% 264 9% 11%
• The finalisation of the construction Health 204 8% 234 8% 15%
Governance and Decentralization 142 6% 165 6% 16%
of two water treatment plants in Engergy 144 6% 161 6% 12%
Kanzenze (Bugesera) and Gihira Private sector Development 123 5% 137 5% 11%
Agriculture 123 5% 128 4% 4%
(Rubavu).
Social Proctection 104 4% 112 4% 8%
• Connecting 109 productive use Water and Sanitation 49 2% 72 3% 47%
areas to water including industrial Urbanization and Rural Settlement 51 2% 57 2% 12%
Environment and Natural Resources 39 2% 53 2% 36%
parks, commercial centres, schools
Information Communication Technology 30 1% 32 1% 7%
and Health Centres. Sports and Culture 19 1% 20 1% 5%
• Undertake construction of Kigali Financial Sector Development 6 0% 6 0% 0%
Total Original resource envelope 2,435 2,876 18%
Centralized Sewerage System Revised 2,585 2,876 11%
phase 1.
for the economy. Key interventions to of new forest planted and 420 has of
Environment and Natural Resources
be implemented in 2019/2020 forest maintained;
had the second largest increase in
include: • Urban Forestry for Sustainable City
budget allocation to the tune of 36%
through beatification, landscaping
when compared to the current year. • Rehabilitation of urban wetlands in
and greening in urban areas;
The increase is towards Rwanda’s Kigali City;
• Increase the area covered by forests
continued effort to preserve Natural • Re-afforestation and rehabilitation
focusing on agroforestry; and
resources and the environment in of the degraded area of Jali, Mount
• Implementation of flood control
order to promote the green economy, Kigali and Rebero with 30 ha
measures.
which presents multiple opportunities
Sustaining the Momentum: Rwanda’s 2019/20 National Budget Insights and Highlights June 2019
PwC 17Tax Amendments
Tax reforms during FY18/19
During FY18/19, a number of tax progress in handling VAT refunds, investments and also reduce tax
administrative measures have been a number of taxpayers still have compliance costs.
implemented. These include: their VAT refund claims rejected.
• Taxpayers can now carry forward
This is mainly because of internal
• Tax exempt entities (NGOs, tax losses for a period of more
system configurations that are
Schools, Churches etc.) are now than 5 years – on receiving
geared toward improving efficiency approval from the Commissioner
required to submit their financial
within the tax administration, but General. This amendment to the
statements using the online e-tax
are becoming costly to taxpayers. law is commendable as it will go a
platform. We however note that
Taxpayers would want to see long way in incentivising capital
generally taxpayers continue to
automation that decreases their tax intensive businesses to claw back
experience frequent system
compliance costs and not their investments without the 5
outages which could be caused by
increasing it. The RRA needs to year restriction.
a lot of traffic on the platform
find ways of minimising the tax
during filing deadlines. The RRA • The threshold to have audited and
cost to taxpayers as they continue
needs to quickly resolve these certified financial statements was
to roll-out these much needed
issues. increased from Rwf400m to
systems that are meant to reduce Rwf600m. This will reduce the tax
• VAT claims are now refunded the time and cost of compliance. compliance cost for a majority of
within 30 to 90 days because of the small and medium sized
During the year the minister also
enhanced capabilities of the EBM businesses because they would no
issued two key ministerial orders that
system and the tax filing portal. longer be required to engage
are meant to facilitate taxpayers’
This is really commendable. auditors to certify their financial
However, despite this major statements before filing them.
Sustaining the Momentum: Rwanda’s 2019/20 National Budget Insights and Highlights June 2019
PwC 18Tax Amendments
Proposed Tax Changes
The Minister did not propose any • Revision of the consumption tax The draft law on tax procedures
major tax changes apart from re- law aimed at increasing tax provides for a reduction in fines and
EBM
confirming that the increase in tax collection but at the same time penalties for non-payment of taxes as
collection will be mainly supported by discouraging consumption of some follows;
continued improvement in tax unhealthy products.
administrative measures and policies.
• 10% if the tax due is paid within 30
As regards the new law on tax days following the due date.
Some of the measures to be
procedures, the draft law – which is
undertaken include:
• Revision of the law on tax
procedures requiring every person
carrying out commercial activities
to use the new “EBM for all”
yet to be gazetted - introduces a
number of remarkable tax
administrative measures.
Fines, penalties and interest
•
• for
20% if the tax due is paid after 30
days but before 60 days - following
the due date.
50% if the tax due is paid after 60
days following the due date.
all
payments
expanding coverage to non-VAT The draft law also recommends that
registered persons. It is not clear Currently, Rwanda has one of the fines for non-payment and non-
whether the “EBM for all” will also most punitive tax penalty regimes in declaration would not apply on a
be rolled out to businesses with the region. Tax penalties for non-tax taxpayer who is not registered with
voluminous transactions such as declaration/under-declaration and non the RRA, but makes a self-disclosure.
Banks. payment of taxes can go as high as These revisions in the penalty regime
70%. are welcome as they will ease the tax
burden taxpayers are currently facing.
Sustaining the Momentum: Rwanda’s 2019/20 National Budget Insights and Highlights June 2019
PwC 19Tax Amendments
Proposed Tax Changes
• Payment in instalments: Currently taxpayers - with
justified reasons – are allowed to pay their tax liabilities
over a period of 12 months. The draft law now gives
mandate to the Commissioner General to extend this
period by another period not exceeding 24 months. This
is also a welcome measure as it will go a long way to Placeholder for image,
ease the cash flow pressures on businesses. chart or graph
• Time limit for recovery of taxes: The draft law now
provides for a time limit of 10 years - from the date the
taxpayer received the notice of assessment – beyond
which the tax authority cannot recover the taxes • Liability of shareholders: The current law on tax
assessed. procedures provides that shareholders who become
involved in the management of the company and/or
• Ring-fencing of mining income and expenses: A misuse company’s funds are liable for any tax liability if
mining company that exploits more than one concession they led to the company’s inability to meet its tax
area will be required to declare and pay taxes separately obligations. A competent court would determine the
on each concession. Losses incurred with respect to liability of the shareholder. However, the draft law now
one mining concession cannot be used by another provides that in case the property of a company is not
concession belonging to the same company. separated from that of a shareholder or of his/her
relative to the second degree, they are jointly liable for
any tax liabilities incurred by the company without a
court decision.
Sustaining the Momentum: Rwanda’s 2019/20 National Budget Insights and Highlights June 2019
PwC 20Tax Amendments
Proposed Tax Changes
Liability of shareholders Stayed customs Transportation sector
• Import duty rate of 0% instead of
We find that this would be a The minister has stayed customs 10% or 25% for road tractors for
challenging provision to implement taxes on selected goods for another semi trailers, motor vehicles for
and we recommend that the court year. transport of goods with gross
decision in such matters should still weight exceeding 20 tons and
be maintained. The minister’s decision to stay the buses for transportation of 50
increase of import duty on these persons and above.
The Minister also noted that fiscal selected items is welcome as it will • Import duty of 10% instead of 25%
incentives will continue be extended not only facilitate the “Made in for motor vehicles for transport of
to some strategic sectors in a bid to Rwanda” initiative, but it will also goods with gross weight exceeding
support “Made in Rwanda” initiatives address the issue of imported 5 tons but not exceeding 20 tons.
and the development of a cashless inflations on the selected basic
economy. goods. • Import duty of 10% instead of 25%
on buses for transportation of more
than 25 persons.
Sustaining the Momentum: Rwanda’s 2019/20 National Budget Insights and Highlights June 2019
PwC 21Tax Amendments
Proposed Tax Changes
Promotion of “Made in Basic goods Information Technology
Rwanda” initiative
• Rice will continue to be taxed at • Telecommunication equipment will
the rate of 45% or US$ 345/MT continue to attract import duty at a
• All capital machinery used in the instead of 75% or US$ 345/MT. rate of 0% instead of 25%.
textile and leather industry will
continue attracting import duty of • Sugar will continue to be taxed at a Financial Sector
0% instead of 25%. rate of 25% instead of 100% or
• As support towards a cashless
US$ 460/MT whichever is higher.
• Certain raw materials used in economy, electronic transaction
devices (smart cards, ATM cards,
industry will continue to be taxed at • Goods imported for use by Armed
a rate of 0% instead of 10% or Point of Sale cards and their
Forces Shop (AFOS) will continue
25%. operating machines) will continue
to attract duty at 0% instead of
to attract import duty at 0% instead
10% and 25%.
• Import duty rates of US$ 4/Kg for of 25%.
second hand clothes and US $5/kg
for second hand shoes.
Sustaining the Momentum: Rwanda’s 2019/20 National Budget Insights and Highlights June 2019
PwC 22East Africa highlights
Kenya
Summary of growth in 2019 Economic drivers in 2018 The identified key initiatives to achieve
Kenya registered economic growth of • Increased agro-processing the agenda and accelerate economic
6.3% in 2018 compared to 4.9% in 2017. activities during the year; growth are:
This growth is the highest recorded for
• Favorable weather conditions for • Creating an enabling environment for
the past 8 years.
both crops and livestock business;
The growth was anchored on relatively production due to long rains in • Prudent and efficient spending;
stable macroeconomics and was 2018; and
attributable to increased agricultural • Mobilization of domestic resources to
production, accelerated manufacturing
• Stable political environment, fund priority projects/programmes;
withdrawal of travel advisories,
activities, sustained growth in • Stabilizing and reducing debt; and
improved security and investor
transportation and vibrant service sector
activities.
confidence in the country. • Implementing reforms that will
enhance efficiency and competitive
Inflation remained low at 4.8% in 2018
compared to 8% in 2017 majorly as a Government priorities for the
result of considerable decline in prices of year
food.
The government plans to prioritize
Growth of economy is projected to remain
its spending towards laying the
strong in 2019 at almost same level as in
foundation for the Big Four agenda.
2018, with 7% growth expected over the
medium term.
Sustaining the Momentum: Rwanda’s 2019/20 National Budget Insights and Highlights June 2019
PwC 23East Africa highlights
Kenya
Key Tax Highlights VAT Customs
Income Tax • Adjustment of the VAT refund • Retention of the import duty rate on
formula to ensure that inputs iron and steel products at 35% with
• Increase of Capital Gains Tax rate relating to zero-rated supplies are the corresponding specific duty
from 5% to 12.5%; factored in the refund process; rate for the products produced in
• Exemption of CGT on gains arising • Reduction of the Withholding VAT Kenya; and
from group re-organizations; rate from 6% to 2%; • Reduction of import duty on raw
• Expansion of the scope of services • Introduction of VAT exemption for timber from 10% to 0%.
attracting withholding taxes other locally manufactured motherboards
than management and professional Excise Duty
and all inputs used in their
fees; manufacture; • Introduction of Excise duty on
• Reduced corporate tax rate to 15% • VAT exemption on all services betting activities at a rate of 10% of
in the first five years for companies the staked amount;
offered to plastic recycling plants
engaged in recycling plastics; and supply of machinery and • Reduction of the excise duty rate
• Tax exemption on the income equipment used in the construction on motor vehicles which are purely
earned from housing funds; and of the plants. electric from 20% to 10%; and
• Tax exemption on income earned • Increase of excise duty on tobacco
by individuals under the Ajira products, wines and spirits by 15%.
Digital program.
Sustaining the Momentum: Rwanda’s 2019/20 National Budget Insights and Highlights June 2019
PwC 24East Africa highlights
Uganda
Summary of growth in 2019 Economic drivers, 2019 VAT
The economy recovered in 2018, The government has identified the • Introduction of 6% withholding VAT;
growing by 6%. The economy is economic drivers to include: and
projected to grow by 6.1% in 2019 and • Peace, security, good governance • VAT Exemption on agro-processing,
continues to bounce from the low and an efficient judicial system; rice mills and agricultural sprayers.
growth of 3.9% in 2017, mainly driven Income tax
by growth across all sectors. • Reliable, efficient and affordable
electronic supply; • Exemption of income derived from
Inflation remained stable in 2018 at leasing or letting facilities in industrial
3.4%, due to the increased food • Water transport and communications parks for 10 years;
supplies in the markets, relatively stable infrastructure;
• Reduced withholding tax rate on long
exchange rate and effective co – • A healthy, well educated and skilled term bonds from 20% to 10%;
ordination of monetary and fiscal workforce; and Stamp duty
policies.
• An effective government machinery. • Proposed amendment to provide for
Government priorities a uniform stamp duty payable on
Key tax highlights bank guarantees, insurance
• Expanding the industrial base of the performance bonds, indemnity bond
economy; Excise Duty etc.
• Exploiting Natural Resource • Amendment to provide registration of Customs duty
Endowments with Environmental manufacturers, importers and • Increase in import tariffs on products
Protection in mind; and providers of excisable goods and which are locally manufactured
• Providing affordable financing for services.
production and business.
Sustaining the Momentum: Rwanda’s 2019/20 National Budget Insights and Highlights June 2019
PwC 25East Africa highlights
Tanzania
Summary of growth Government priorities Revenue policies
Tanzania recorded real GDP growth The priority for 2018/19 will be on The Government is committed to
rate in 2018 of 7.0% compared to flagship infrastructure projects and in increasing and strengthening
6.8% in 2017. The GDP growth was creating a conducive environment for domestic revenue collections by
driven by increased investment investment and business by pursuing the following policies:
especially in infrastructure, stable implementing the Blueprint for
supply of electricity, improvement in Regulatory Reforms to improve the • Increase efficiency in
transport services and favourable business environment. administration and collection of
weather conditions that resulted in an domestic revenue;
The focus will be on the following
increased food harvest and other priority areas: • Widen the tax base through
crops. identification and registration of
• Agriculture: new tax payers and formalization
• Industries: of the informal sector;
• Livestock and fisheries: • Strengthen capacity for monitoring
and controlling of transfer pricing;
• Economic growth and human
development • Enhance administration of tax
exemptions; and
• Improvement of enabling business
environment and investment • Improve efficiency in domestic
climate revenue collection;
Sustaining the Momentum: Rwanda’s 2019/20 National Budget Insights and Highlights June 2019
PwC 26East Africa highlights
Tanzania tax highlights
Value added tax • Changes in presumptive tax rates Customs
and now applies to taxpayers with
Exemptions proposed include:
annual turnover up to TZS 100m.
• To protect local industries, duties
• Imported refrigeration boxes, grain have been increased on the
drying equipment, aircraft following imported products:
Withholding tax roasted coffee, flat-rolled products
lubricants by domestic operators,
National Air Force and Airlines Proposed changes includes: of iron or non-alloy steel ,flat-rolled
products of iron or non-alloy steels,
recognised under bilateral air • Exemptions on fees charged to reinforcement bars and hollow
service agreement. Government on loans received profiles, horticultural products and
Zero rating proposed: from non residential banks and monofilament.
other international financial
• Supply of electricity from Tanzania institutions. • Duties have been
mainland to Zanzibar decreased/remitted on the
Exemptions abolished: Sanitary pads following products: baby diapers,
Excise duty equipment and appurtenant used
Income tax Proposed impositions for polishing and heat treatment of
• Reduction of the CIT rate for new • 10% on locally made artificial hair
gemstones, papers used as raw
investors in the production of materials for manufacturing of
and 25% on imported ones. packaging materials for export of
sanitary pads from 30% to 25%.
• 10% on pipes and plastics horticulture products, agricultural
• Increase in minimum turnover materials seeds packaging materials and
required for a taxpayer to prepare
aluminium alloys used as raw
audited financial statements to TZS • Exemptions-Aircraft lubricants by
materials to manufacture
100m. domestic operators, National Air
aluminium pots.
Force and airlines.
Sustaining the Momentum: Rwanda’s 2019/20 National Budget Insights and Highlights June 2019
PwC 27Contacts
Rwanda Uganda Kenya Tanzania
Nelson Ogara
Moses Nyabanda Richard Marshall David Tarimo
Associate Director
Partner Associate Director Partner
+254 (20) 285 5000
+250 (252) 588203/4/5/6 +256 (0) 312 354439 +255 (0) 22 219 2600
nelson.ogara@pwc.com
moses.o.nyabanda@pwc.com richard.marshall@pwc.com david.tarimo@pwc.com
Tom Kavoi
Frobisher Mugambwa Dorothy Uzamukunda Rishit Shah
Senior Manager
Associate Director Manager Partner
+254 (20) 285 5102
+250 (252) 588203/4/5/6 +256 (0) 312 354400 +255 (0) 22 219 2601
tom.kavoi@pwc.com
frobisher.mugambwa@pwc.com dorothy.b.uzamukunda@pwc.com rishit.shah@pwc.com
www.pwc.com/rw
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