Rwanda eyes more revenues after cabinet okays new tax measures

The Rwandan government is set to increase its revenue in the 2025-2026 fiscal year following the approval of several tax hikes by the Cabinet. These measures are expected to boost revenue mobilization but will likely impact consumers' spending habits and disposable income. Teddy Kaberuka, an Economic Analyst and CEO of M4Progress Ltd, sheds light on the implications of these tax changes. As the government aims to raise more funds, consumers are bracing themselves for higher prices on various products and services. From favorite beers to cosmetics and even gambling, the new tax regime will touch different aspects of daily life. The implementation of these tax reforms is expected to lead to inflationary pressure and a potential slowdown in economic growth in the short term. Kaberuka highlights that the transport sector, including vehicles, import duties, and fuel, will be significantly affected by the new tax structure. The increase in taxes on tourism activities could also result in a decrease in operations within the industry. This may have a ripple effect on the overall business environment, impacting individuals' disposable income and spending behavior. The introduction of taxes on non-essential products like alcohol and tobacco is likely to prompt consumers to adjust their spending patterns. Additionally, the introduction of a 15% exercise duty on cosmetic and beauty products, higher registration fees for vehicles, and adjustments on fuel levies will further burden consumers. The gambling sector, which has been on the rise in Rwanda over the past five years, is also targeted for taxation. Kaberuka notes that the government views gambling as a strategic sector for revenue generation. As the sector expands both in urban and rural areas, the government is tapping into its potential for increased revenue. The taxation on 'sin' products like cigarettes, beer, and airtime is another area of focus in the new tax measures. The significant increase in taxes on cigarettes and beer may deter some consumers, while others may continue to purchase these products regardless of the higher prices. However, Kaberuka expresses concern over the tax hike on airtime, emphasizing the importance of communication in various industries. The impact of this tax on airtime could limit people's ability to communicate effectively, affecting productivity in sectors reliant on communication. Overall, the implementation of these new tax measures signals a shift in Rwanda's taxation policy, with the government aiming to raise more revenue from various sectors of the economy.