A Critical Analysis of Effectiveness of Tax Offences Control Mechanisms Under Rwandan Law
par Charles KABERA
Kigali Independent University - LLB 2008
Although Rwandan Tax Law clearly asserts which acts are accepted as clear violation of tax legislation, there are other frequently made violations of tax legislation similar to ones mentioned in the Rwandan Tax Law. Professor Shaulov and professor Cann (2000) provide some examples of such offences, which include tax evasion26(*), creation of illegal organizations and violation of cash payment disciplines27(*). Hence, in practice there are more cases, which can be determined as tax offences.
Another contemporary problem in the field of responsibility for tax offences involves provisions regarding procedural matters of proving violation of tax law. More specifically, there are no appropriate rules that distinguish breach of tax law by an individual from a breach of tax legislation by a legal entity. For example, in the case of a trainee accountant who makes a minor error and mistakenly overstates or understates the accounting information in Rwandan tax law there is no clear response to the question of who is responsible: The legal entity or the accountant?
Another aspect of the current tax law of Rwanda is the absence of some fundamental conceptions like theoretical composition of tax offences. More precisely, very few academics have ever discussed the elements of tax offence. Therefore, the such conceptions of Tax Law are mainly based on other branches of law such as Administrative Law and Criminal Law. Consequently, tax authorities and other law enforcement organs usually need to apply an analogous system of the determination and proof in tax law28(*).
There is a misconception that tax offences are not treated with the same seriousness as other offences of fraud or dishonesty, and that tax offences are somehow «victimless» crimes. That is incorrect. A conviction for tax evasion can carry the very distinct risk of imprisonment as well as heavy fines29(*). The threat of long imprisonment may create some amount of fear and induce offenders to pay their taxes30(*)
Finally, tax offences may be specified in tax law covering matters such as late filing, late payment, and failure to declare taxable income or transactions, and negligent or fraudulent misstatements in tax declarations31(*).
Examples Issue oriented audits handled were 32 and the comprehensive audits were 423. In SMTO, additional assessment (tax and penalties) raised as a result of audits an amount equivalent to Rwf 3.2 billion or 8.3% of total amount collected by the office as shown in the table below:
Amount of additional assessments and penalties by tax in SMTO (Values in RFR)
Source: RRA, 2007
Comparing amount recovered from audits and that collected through self assessment, the compliance ratio in this segment is 91.7%. This figure however good it is does not mean that informal sector has reduced. The reason is that the Authority has focused its efforts to the existing taxpayers in this segment in order to improve its compliance.
In Large Taxpayers Office, 266 cases were audited comprehensively against 256 cases planned, thus an achievement of 103.9%. Out of 266 cases audited, 191 were finalised contributing an additional amount of Rwf 12.8 billion. The table below shows in details the additional assessment raised as a result of audits for 2007 in LTO. This makes it 88.8% compliant.
Additional assessments and penalties by tax in LTO (Values in Rwf)
Source: RRA, 2007
In Customs and Excise Department, 43 post clearance audits were conducted against 208 planned for 2007, thus an achievement of 20.7% and revenues recovered totalled to Rwf 353.2 million. This underperformance was due to restructuring that was going on and shortage of staff in the department.
* 26 Rwandan Tax Law does not definition of tax evasion neither does it mention the term.
* 27 Ibid at p. 76
* 28 For further details refer to the General Provisions of the Criminal Code of the Republic of Rwanda.
* 29 http://www.taxcounsel.co.nz/Services/Tax+Prosecutions.html, cited on 24/12/2008
* 30 http://www.financialexpress.com/news/Tougher-penalties-for-serious-tax-offences-proposed/210649/, cited on 29/12/2008
* 31 Barry Larking, International Tax Glossary, IBFD Publications, 1996
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