THE CONTRIBUTION OF INDIRECT TAXES ON TAX REVENUE COLLECTIONS IN RWANDA. A CASE STUDY OF RWANDA REVENUE AUTHORITY (2005-2020)
Abstract
The research purpose was to assess the contribution of indirect taxes on revenue collection in Rwanda. Specifically the study focused on the contribution of Value Added Tax (VAT), Excise duty and Import duties on tax revenue collections in Rwanda. The researcher reviewed both theoretical and empirical literature electronic tax management on revenue collection. The researcher used descriptive method of study based on qualitative and quantitative approach in order to get better analysis of the study. The target population for this study included employees of RRA at Headquarters and Customs Services Department. The population size was tax revenue data for sixteen years from year 2005 to 2020. The study used convenience sampling method was used to select sixteen year period. Data was collected from both primary and secondary data using questionnaires and documentation. Data collected was analyzed using SPSS version 21. Data analysis involved statistical computations for averages, percentages, and correlation and regression analysis. Ordinary least squares (OLS) regression method of analysis was adopted to determine the inferential statistics. Regression analysis was used to evaluate the degree of the contribution of indirect taxes on revenue collection in Rwanda and the findings presented in tables and graphs. From the findings on descriptive analysis of various VAT accruing from the different years, the study found that mean for the Value Added Tax Revenue was Rwf. 486,043 Billion, the maximum for the Value Added Tax for the period was 241,426 Billion francs while the minimum value was Rwf. 57,746. On descriptive analysis of various Excise duty accruing from the different years, the study found that mean for the Excise duty was Rwf. 95,496 Billion, the maximum for the Excise duty for the period was 176,493 Billion francs while the minimum value of Excise duty was Rwf. 21,505. The regression coefficients revealed that there was a positive and significant relationship between Value Added Tax and employee Tax revenue collection (r=0.113, p=0.036). This was supported by a calculated t-statistic of 2.103 that is larger than the critical t-statistic of 1.96. Further, the results revealed that there was a positive and significant relationship between Exercise duty and Tax revenue collection (r=0.395, p=0.000). This was supported by a calculated t-statistic of 3.515 that is larger than the critical t-statistic of 1.96. Lastly, there was a positive and significant relationship between Import duty and Tax revenue collection (r=0.433, p=0.000). From the findings concludes that is a strong relationship between indirect taxes (Value Added Tax, Exercise duty and Import duty) on tax revenue collection in Rwanda. The study found that there was a positive association between Value Added Tax, Exercise duty and Import duty on tax revenue collection. On overall the relationship between the indirect tax sources and economic growth was found to be significant. Against the above result, we recommended among others that the number of goods on the VAT list should be increased and the burden of custom duties should be lessened on infant industries, all aimed at boosting indirect tax revenue accruing to Rwanda and ultimately stimulating tax revenue collection. The study recommended that the government should put in place mechanism to close up the loopholes in the VAT collection system as its effect is significant. Moreover, company’s remittance of VAT revenue should be addressed by the government to ensure full compliance hence an increased tax revenue collections. Lastly, the government should ensure that VAT and Exercise Duty practices encourage international business participation and investment to boost the tax collection revenue of Rwanda.
Keywords: Value Added Tax, Exercise Duty, Import Duty, Rwanda Revenue Authority, Tax Revenue collection.
CITATION: Rwakunda, L., & Mpakaniye, J. P. (2022). The contribution of indirect taxes on tax revenue collections in Rwanda. A case study of Rwanda Revenue Authority (2005-2020). The Strategic Journal of Business & Change Management, 9 (2), 552 – 563.
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DOI: http://dx.doi.org/10.61426/sjbcm.v9i2.2282
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