As per existing law, income not exceeding Rwf30,000 per month is taxed zero percent, while that ranging from Rwf30,001 and Rwf100,000 has to pay 20 percent tax rate, and above that is taxed 30 percent.
The adopted draft law proposes Rwf60,000 as the minimum taxable income instead of Rwf30,000 and the reduction of tax after two years since the law was enacted.
Once enacted, income ranging from Rwf60,001 and Rwf100,000 will be taxed 20% initially to be reduced to 10% after two years. Workers earning from Rwf100,001 and Rwf200,000 will be taxed 30% to be reduced to 20% after two years.
The proposal was tabled to reduce the tax burden on low-income formal workers and promote employment.
IGIHE has learnt that the draft law was not immediately presented to the parliamentary Standing Committee on National Budget and Patrimony but rather was returned to the Government for further review.
Even though the draft law is still under review, there is optimism that the clause meant to reduce tax burden on low income earners won’t be annulled.
Parliamentarian Théogene Munyangeyo has told IGIHE that approving the proposal would hugely contribute to citizens’ progress.
“Raising the taxable income would be a great relief to citizens. This should be more optional than increasing salary because it would cause price hikes. By doing so, citizens’ kill two birds with one stone with possible avenues to run income generating activities,” he said.
Munyangeyo explained that it was long ago since the establishment of existing tax on income stressing the need to have it revised and aligned with financial stability.
“The law has existed for long. If it was established at a time when a dollar was exchanging for Rwf300 or Rwf400, but apparent that the amount has doubled, the revision will ease citizens’ burdens,” he noted.
The existing tax on salary would see some private companies employing a large number of people limiting their salary to Rwf30, 000 to cut expenses.
Once the proposal is approved, Munyangeyo said, it would see some workers’ salary increased without incurring losses to the Government.
He explained that some employees seemed to be limited to that amount of money while others kept working without employment contracts.
Munyangeyo observed that raising the taxable income will facilitate investment while enabling people to diversify sources of income.
IGIHE has learnt that the entire proposal was returned to the Government after it emerged that many clauses needed to be revised.
As the proposal was being reviewed, some parliamentarians suggested that the minimum taxable income should increase to Rwf100, 000.