A large number of small and medium businesses in Rwanda evade or avoid taxes, according to the Rwanda Revenue Authority. Small business owners claim that it is difficult for them to declare taxes on time or even to declare them at all, due to a number of constraints imposed by the tax administration.
“Previous online platforms offered were quite complicated to use, and actually favored large businesses,” said Marie Clarisse Inshutiyase, a basket weaver in Karongi district. “They require computer knowledge, which we do not have,” she explained.
Céléstin Bumbakare, the RRA commissioner for domestic taxes, agreed Clarisse has a good point: “The existing electronic facility, e-filing, may indeed be difficult to use for small business owners who do not have the computer knowledge to use it. M-Declaration will specifically address this issue.”
Making Tax Payment Process Easier for Small Businesses
On October 5th, 2013, the Rwanda Revenue Authority, supported by the World Bank Group’s Rwanda Investment Climate Program, launched M-Declaration, a mobile platform that will make declaring taxes easier and faster for small businesses.
With M-Declaration, taxpayers simply dial an access number and follow basic steps to declare their taxes: report previous year’s turnover, calculate the profit tax for the current year, and submit payment using a traditional bank account or mobile money. M-Declaration also offers taxpayers the option of making payments in quarterly installments. Taxpayers can even check the status of their previous tax transactions on the system.
David Nduwimana, a motorcycle taxi driver in Rwandan capital Kigali, is already seeing the value of M-Declaration. “The system is a great relief to my colleagues and me. Too much paperwork really made it difficult for us to comply.”
The Rwanda Revenue Authority expects the convenient system to increase tax collection and incite the country’s estimated 80,000 informal businesses to register. Ultimately, M-Declaration is expected to reduce tax evasion.
The World Bank Group offered approximately $100,000 for the development of M-Declaration as well as the sensitization campaign which will spread awareness of the new system to micro and small enterprises.
The launch of the platform in Rwanda will serve as learning grounds for a broader agenda: “This mobile application reduces the costs of tax compliance and fits with the emerging use of mobiles in Africa as a channel for government to business service delivery,” said John Wille, Lead Private Sector Specialist, World Bank Group. “Going forward we will study M-Declaration’s results in Rwanda and refine the service delivery model so we can share the lessons learned with other tax authorities in Africa.”