Causes and implications of tax evasion and avoidance in Rwandan economy: case study of Rwanda Revenue Authority

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Kampala International University, College of Economics and Management
Taxation is the major source of government revenue in Rwanda and developing countries at large. Following the economic crisis of 1994 genocide, Rwanda has made a substantial progress in rebuilding the country's economy and social infrastructure compared to the situation before the war. This economic reform has been possible due to a number of reforms undertaken by the government of Rwanda including tax policy and tax administration reforms among others, the establishment of Rwanda Revenue authority (RRA) as support organ to curb tax evasion and avoidance. The specific study aimed at identifying the forms of tax evasion; find out the techniques used by Rwanda Revenue Authority in minimizing chances of tax evasion and analyzing the causes and effects of tax evasion. Questionnaires and interview guide were employed to collect primary data while secondary data was collected from various books and publications. Data is organized and presented in the table form. Purposive techniques were used to meet the purpose of the study. The study findings revealed that, the major causes of tax evasion and avoidance include desire of getting higher profits and low taxable income. While the ways of evading and avoiding taxes include; minimizing revenues, inflating expenses and misquotation of origin for their products. The types of business where tax evasion and avoidance are very rampant were revealed as; retail and import type of businesses respectively while the magnitude of tax evasion and avoidance was still very high. The major effects of tax evasion and tax avoidance are limitations of public infrastructures, reduction of national budget and increase of income inequalities and hindrance of investment. From the above, the researcher has made major recommendations as follows; Rwanda Revenue Authority to revise tax policy in order to be moderate, tax payer's sensitization and tax decentralization policy. The researcher found out that taxes play a positive role for economic development of the country. However the findings indicated that imposing high tax rate, complicated tax laws and long procedures would result the problems like smuggling, tax evasion and avoidance. xiv "Causes and implications of tax evasion a11d tax avoidance in Rwandan economy" Recommendations and comments have been put forward to provide solutions of fighting against tax evasion and tax avoidance in Rwandan economy. Rwanda Revenue Authority should set up strong laws and strengthening audit practices so as to leave no room for tax evasion and avoidance, Establishing R.R.A. anti- smuggling mtlts operating inside and outside the country. Tax payers should take into considerations ethical issues when doing business and avoid tax crimes because the related penalties may lead to failure of their business.
A research report presented to the School Of Business and Management for the Award of Bachelor of Business Administration Of Kampala International University
Tax, Evasion