EFFECT OF TAX EVASION ON VAT COLLECTION IN RWANDA (2011-2017)
Abstract
Tax payment is a civic duty and an imposed contribution by the government to contribute to her principal source of revenue to provide public goods and services to its citizenry. It is a compulsory unrequited payment to the Government. Tax evasion prevalence is vast and greatly impairs taxation’s macro- economic objectives thus creating a gulf between actual and potential government tax revenue raising many issues which need urgent attention and solutions. However much the government endeavors to exercise its sovereign right to collect taxes, nobody likes paying taxes although there is great appreciation that taxes need to be paid and this drives some people into tax evasion making the government constantly fail to raise targeted tax revenue. This study sought to establish how tax evasion affects Value Added Tax collection in Rwanda. The study employed a survey research design which involved collection of information from a sample of individuals through response to questions. The study targeted 50 tax evaders investigated by Rwanda Revenue Authority. The study relied on secondary data informed by Rwanda Revenue Authority investigated cases, related materials published by government authorities, work of other researchers and authors in the form of journals, books, bulletins and newspapers articles as well as sources from the internet. The researcher used quantitative methods to quantify the problem by way of generating numerical data. A regression analysis was used to identify the effect of tax evasion on tax revenue. There were strong positive and significant effects of tax compliance based on wrong doing on VAT collection (β = .444; t = 1.815; p < 0.05) and registered of relevant taxes (β = 1.075; t = 1.815; p < 0.05). There were positive effects of registered of relevant taxes on VAT collection (β = .230; t =. 850; p > 0.05). However, there was weak but significant effects of detection and penalties on VAT collection (β = 1.231; t = 3.616; p < 0.05.). Findings from the analysis using statistics techniques revealed that tax evasion and avoidance had adversely affected economic growth and development in Rwanda, and also, that lack of good governance and unpatriotic act of tax payer, was the basis for which tax evasion and tax avoidance activities was perpetrated. The study therefore recommended that the government should embrace, promote and encourage voluntary compliance of tax liability by the tax payers.
Keywords: Value Added Tax Collection, Tax Evasion, Rwanda Revenue Authority
CITATION: Amani, P., & Harelimana, J. B. (2020). Effect of tax evasion on VAT collection in Rwanda (2011-2017). The Strategic Journal of Business & Change Management, 7(3), 287 – 298.
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DOI: http://dx.doi.org/10.61426/sjbcm.v7i3.1672
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