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Rwanda may offer 7-yr tax holidays, slash corporate tax-official
October 1, 2014 / 4:18 PM / 3 years ago

Rwanda may offer 7-yr tax holidays, slash corporate tax-official

* Parliament to approve investment code by 2014-end

* Will include 7-yr tax holidays for big investors

* 30 percent corporate income tax may be cut by up to half

By Matt Smith and Sagarika Jaisinghani

DUBAI, Oct 1 (Reuters) - Rwanda expects to have a new investment code at the start of 2015 that could offer incentives such as seven-year tax holidays for bigger investors and sharply lower corporate taxes, a senior official said on Tuesday.

The new code is part of a broader strategy to wean Rwanda’s economy off foreign aid and bolster ebbing growth.

“Nothing is final, but we’re looking at providing seven-year tax holidays for large scale investments,” said Clare Akamanzi, chief operating officer of the state-run Rwanda Development Board, declining to specify the value of such investments.

“When you talk about big for the Rwandan economy, I think that might be small in other economies. It’s not something to worry about,” she told Reuters.

Rwanda has won broad acclaim for policies that have ranked it the easiest place in Africa to set up a new company after the nation was left in ruins following the 1994 genocide that killed 800,000 people. Western donors have poured in cash and praised the efficiency with which aid dollars are used.

But its economic ambitions have faced headwinds. Some Western aid flows were halted in 2012 after U.N. experts accused Rwanda of supporting a rebel group in eastern Democratic Republic of Congo. Rwanda has vigorously denied the charge.

Akamanzi said parliament, dominated by supporters of President Paul Kagame, was expected pass the new code by the end of 2014 and will be in place for the start of next year.


Rwanda will also slash by up to half its corporate income tax rate of 30 percent for sectors of strategic importance to the economy, she said.

These include infrastructure projects, energy, financial services, communications, technology and logistics, said Akamanzi, who estimated that agriculture currently accounts for 30 percent of the economy and 70 percent of employment.

Exporters apart from those of coffee, tea and minerals will also qualify for the new code’s tax benefits provided they export more than half the goods they produce, said Akamanzi.

Lower taxes would not lead to lower revenues, she argued.

“If you look at countries that have done the reforms we’re doing, there’s enough evidence that lowering taxes can help you increase the tax base,” she said. “We think it’s better to get a little bit from so many than get so much from very few.”

Rwanda’s economy grew 4.6 percent in 2013. Both the government and the International Monetary Fund expect its GDP to increase by 6 percent this year, considerably below the government target of 11.5 percent annual growth for five years.

“By all accounts, it’s a high target,” Akamanzi said. “We believe it’s possible. In order to reach the middle income status we want our country to reach by 2020, the economy must grow that quickly.”

Foreign aid accounts for about 38 percent of Rwanda’s economy, Akamanzi said, describing it as “an unpredictable source of financing, which we want to reduce.”

“So the key thing is how to increase investments by businesses,” she said. “Hopefully the next three years we will go back to our higher growth rates.” (Reporting by Matt Smith and Sagarika Jaisinghani; Writing by Matt Smith; Editing by Tom Heneghan)

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