Private sector wants more say in budget–making process

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The Finance Minister Amb. Claver Gatete will tomorrow present the 2014/15 budget estimates to Parliament. But as Private Sector Federation (PSF) was presenting its position paper on the proposed budget framework to members yesterday, it called for more consultations in the budget making process. The private sector members are not happy that the federation was not consulted during the budget making process.

“It is not good practice not to involve the private sector in the budget making process…It can’t continue like this; all the sectors should be consulted during this process,” Hannington Namara, the PSF chief executive officer, said at a pre-budget breakfast meeting organised by the Private Sector Federation (PSF) at the Kigali Serena Hotel yesterday.

PSF used the meeting to present its position paper on the 2014/15 budget framework and seek members’ views on the budget proposal.

Namara said the views gathered from members yesterday would be incorporated in the PSF position paper that will be submitted to Parliament today. Parliament will forward the recommendations to the Ministry of Finance for consideration in the final budget paper, he added.

“We still have until July 1 to lobby the government to review some of the proposed policies,” Namara said.

Meanwhile, the private sector expects the government to unveil policies aimed at easing the process of acquiring land and ensuring availability of foreign exchange. They also want constant power supply and tax cuts.

“There is need for more private-public sector collaboration, expansion of the exports base and review of some of the proposed taxes. Taxes like VAT (value added tax) on services and exports and personal income tax on specific talents and skills are scaring away investors,” Angello Musinguzi, a tax consultant at KPMG, said while presenting a draft private sector position on the national budget.

The private sector also wants government to review the tax rates on dividends and interests, royalties, fees for technical services and other types of income and taxes on capital gains.

Musinguzi said countries like Mauritius and Trinidad and Tobago provide tax exemptions on dividends, interests and royalties to attract investors.

However, Andrew Mold, a senior economist at the United Nations Economic Commission for Africa, warned that creating a tax haven may not be realistic for Rwanda, saying the country is bigger than the island nation of Trinidad and Tobago in terms of the population and resources allocation. He advised the government to widen the tax base and promote import substitution strategies.

“If you compare Rwanda’s property tax rate with Uganda or Kenya, it’s significantly lower here… these countries raise a lot of revenue from it. So, broadening the tax base is a more interesting strategy,” he said.

The government plans to spend Rwf1.7 trillion next financial year, a slight increase from Rwf1.6 trillion this year, Rwf906.8b of which is expected to be raised from tax revenue collections compared to Rwf782.5b this year.

To achieve this target, the government plans to implement tax reforms that include increasing excise duty to 10 per cent on airtime and improving revenue collection by enforcing the use of electronic platforms.

Musinguzi called on the government to ease the process of acquiring land for real estate development, saying it is too bureaucratic, and also to address the challenge of obtaining free hold land titles for investors.

The business people called for more funding to the agriculture sector to boost fertiliser use, increase access to improved seeds, as well as promote crop irrigation to enhance agriculture output. Currently, 18 per cent of the total households in Rwanda use fertilisers, while 30 per cent use improved seeds.

Dr. Mbasana Elie Marvin, the S&M Consultancy managing director and one of the panelists, called for more government support to the services sector, arguing that it is reliable and relevant to ensuring sustainable growth. He however, challenged sector players to be innovative and flexible to sustain the sector’s growth. “Why would one refuse to give a customer discount if they arrived at the hotel at 10:00pm or midnight?” Mbasana said.

Gustave Tombola, the vice-rector in charge of academics at Rwanda Tourism University College, called for harmonisation of call roaming charges to reduce the cost of doing business.

The 2014/2015 budget will still prioritise areas that support the second Economic Development Poverty Reduction Strategy goals by mainly investing in energy production, increasing exports and supporting the private sector.