The Minister of Finance and Economic Planning, Yusuf Murangwa, made the revelation on Tuesday, February 11, 2025, as the government unveiled new tax reforms approved during a cabinet meeting chaired by President Paul Kagame on Monday.

Rwanda’s current tax-to-GDP ratio remains below the global benchmark of 16%, necessitating strategic reforms to expand the tax base.

The minister emphasized that raising the tax-to-GDP ratio is essential for funding the country’s transformation agenda under the Second National Strategy for Transformation (NST2).

Data from the Rwanda Revenue Authority (RRA) show that the government collected Rwf 2.62 trillion in tax revenue during the 2023/2024 fiscal year. The revenue is projected to exceed Rwf 2.97 trillion in the 2024/2025 fiscal year.

Minister Murangwa explained that lower-middle-income countries should maintain a tax-to-GDP ratio of at least 19%, upper-middle-income countries should target 23%, and high-income countries aim for at least 38%.

"In the short term, by the end of NST2, we aim to reach at least 18% or 19%, with further increases in the following years," he said.

"To achieve upper-middle-income status by 2035, Rwanda will need a tax-to-GDP ratio of around 23%. By 2050, as a high-income country under Vision 2050, this ratio should reach approximately 38%."

To meet these fiscal targets, the Rwandan government has introduced new tax policy reforms for the 2024/2025 fiscal year, focusing on broadening the tax base, enhancing revenue mobilization, and streamlining tax administration.

"These new tax policy reforms are part of the Government’s medium-term strategy to broaden the tax base, increase revenue mobilization, and streamline tax administration in order to meet Rwanda’s development goals," Murangwa stated.

Key sectors affected by these reforms include consumer goods, transportation, telecommunications, tourism, and gambling. New levies have been introduced to ensure economic sustainability while driving national transformation.

One of the most notable changes is the introduction of a 15% excise duty on cosmetic and beauty products, including makeup, body lotion, and hair products. However, essential pharmaceutical beauty products will be exempted in consultation with the Ministry of Health.

Vehicle owners will also feel the impact of the reforms, as registration fees for all types of vehicles, including electric cars, will be increased. However, the exact figure was not immediately revealed.

Similarly, the fuel levy has been adjusted from a fixed fee of Rwf 115 per litre to 15% of the Cost-Insurance-Freight (CIF) to support road maintenance initiatives.

Mobile phone users will now have to pay 18% Value Added Tax (VAT) on mobile phones, which had been exempted since 2010. The government argues that while the exemption initially helped to boost digital penetration and smartphone affordability, the reintroduction of VAT will allow for more sustainable revenue collection without stifling smartphone access.

A similar VAT exemption introduced in 2012 on ICT equipment will also be revoked, though selected ICT devices will remain tax-free based on consultations with the Ministry of ICT and Innovation.

The gambling industry is set to face higher tax measures, with the tax on Gross Gambling Revenue (GGR) rising from 13% to 40%, and withholding tax on winnings increasing from 15% to 25%. The government said the move aims to encourage responsible gambling while also increasing tax revenues from the industry.

Additionally, the tourism sector will be subject to a new Tourism Levy, which imposes a 3% tax on accommodation costs. This measure aims to fund investments in the country’s tourism and hospitality industry, a critical pillar of Rwanda’s economic growth.

In a bid to encourage green mobility and reduce carbon emissions, the government has maintained a 25% import duty exemption for hybrid vehicles while introducing an age-based excise duty system. Under the new system, hybrid cars less than three years old will be taxed at 5%, those between four and seven years old at 10%, and vehicles older than eight years at 15%.

Additionally, VAT and a 5% withholding tax will be reinstated for hybrid vehicles, while fully electric vehicles will remain tax-exempt to encourage their adoption. However, this measure will only take effect in the 2025/2026 fiscal year.

Excise taxes have also been adjusted in other areas. The tax on cigarettes has increased from Rwf 130 to Rwf 230 per pack, along with an additional 36% tax on the retail price.

The excise duty on beer has risen from 60% to 65% of the factory price. For airtime, the tax has been raised from 10% to 12% in 2024/2025, with a gradual increase to 15% in the medium term.

Beyond these direct tax changes, the government has also signalled upcoming policy adjustments targeting financial services, transportation, and ICT in the next financial year.

The Minister of Finance and Economic Planning, Yusuf Murangwa, made the revelation on Tuesday, February 11, 2025, as the government unveiled new tax reforms approved during a cabinet meeting chaired by President Paul Kagame on Monday.