THE ASSESSMENT OF TAX COLLECTION CHALLENGES ON ECONOMIC GROWTH IN RWANDA. A CASE OF RWANDA REVENUE AUTHORITY (2018-2020)
Abstract
This study examines the challenges in tax collection faced by the Rwanda Revenue Authority (RRA) and their impact on economic growth from 2018 to 2020. Key issues include tax avoidance, evasion, administrative inefficiencies, and a cultural tendency among taxpayers to evade taxes. These challenges have led to reduced national revenues, undermining public service funding and exacerbating economic inequality. The Rwandan government has made efforts to address these problems by investing in human resources, infrastructure, and service delivery. Despite these efforts, persistent tax evasion and avoidance continue to impede economic progress. Using both qualitative and quantitative data, this research identifies the primary hurdles to effective tax collection and their consequences on economic growth. Additionally, it proposes strategies for enhancing revenue collection, such as strengthening enforcement mechanisms, improving administrative efficiency, and enhancing taxpayer education. The regression analysis revealed significant predictors of tax economic growth in Rwanda. The constant term was 0.685 (p = 0.003), indicating a baseline level of economic growth when all predictors are zero. Tax compliance had a positive effect on economic growth (B = 0.113, p = 0.036), with a standardized coefficient (Beta) of 0.105, suggesting that improved tax compliance is associated with increased economic growth. Tax administration was also a significant predictor (B = 0.395, p < 0.001), with a Beta of 0.358, highlighting the importance of effective tax administration in promoting economic growth. Lastly, tax structure showed the strongest impact (B = 0.433, p < 0.001), with a Beta of 0.477, indicating that a well-structured tax system significantly contributes to economic growth. These findings underscore the critical role of robust tax policies and administration in enhancing Rwanda's economic growth. The study demonstrates that tax compliance, administration, and structure are significant predictors of economic growth in Rwanda, with effective tax policies and administration playing crucial roles. Improving these aspects can substantially enhance the country's revenue generation and support sustainable economic development. To enhance economic growth, the Rwanda Revenue Authority should prioritize improving tax compliance through targeted taxpayer education and enforcement measures. Additionally, streamlining tax administration and refining the tax structure can further bolster revenue collection and support sustainable development. Future studies should explore the impact of specific tax policy reforms on compliance rates and economic growth to provide targeted recommendations for enhancing tax effectiveness. Additionally, examining the role of taxpayer education programs and their influence on reducing evasion could offer valuable insights into improving tax administration and overall economic development.
Keywords: Tax Compliance, Tax Administration, Tax Structure, Economic Growth, Revenue Collection, Rwanda Revenue Authority
CITATION: Gatera, P., & Niyibizi, F. X. (2024). The assessment of tax collection challenges on economic growth in Rwanda. A case of Rwanda Revenue Authority (2018-2020). The Strategic Journal of Business & Change Management, 11 (3), 232 – 248. http://dx.doi.org/10.61426/sjbcm.v11i3.3022
Full Text:
PDFReferences
accessible at https://www.sciepub.com/reference/323951
Akai, N., & Sakata, M. (2002), Fiscal decentralization contributes to economic growth: Evidence from state-level cross-section data for the United States. J. Urban Econ. 2002, 52, 93–108.
B.R.i Jackson & Milliron (1986),i Taxi compliancei research:i Findings,i problemsi andi prospects,i “Journali ofi Accountingi Literature”i 1986,i 5,i pp.i 125–165.
Barrios S., & Schaechter A. (2008), The quality of public finances and economic growth,
Carnahan,i M.i (2015,i January).i Taxationi Challengesi ini Developingi Countries.i Asiai &i thei Pacifici Policyi Studies,i 2(1),i 169–182.
Chindo S., Umar B. et al (2015), Human Capital, Technology, and Economic Growth: Evidence From Nigeria, https://journals.sagepub.com/doi/pdf/
Cowell,i F.i (1990).i (),i Thei Economicsi ofi Evasion,i Cheatingi thei Government:s,.i Cambridge,i MA:i MITi Pres.
Deloittei Touchei Tohmatsui Limitedi (2015).i Besti practicei ini corporatei taxi governancei -i fromi thei financei teami toi thei board.i Newi Zealand:i Deloittei Touchei Tohmatsui Limited.
Doran,i M.i (2009).i Taxi penaltiesi andi taxi compliance.i Harvardi Journali ofi Legislation,i 46,i 111-161.
Economic Papers 337(September 2008).
Field, A. (2018). Discovering Statistics Using IBM SPSS Statistics (5th ed.). Sage Publications.
Fredericki Mpambara,i B.i B.i (2013).i Assessmenti ofi challengesi facedi byi taxi collectorsi andi taxi payersi ini rurali areas:i Ai casei studyi ofi Nyarugurui District.i Easti Africani Journali ofi Sciencei andi Technology,i 17.
Gbato,i A.i (2017,i Octoberi 25).i Impacti ofi Taxationi oni Growthi ini Sub-Saharani Africa:i Newi Evidencei Basedi oni ai Newi Datai Set.i Internationali Journali ofi Economicsi andi Finance,i 9(11),i pagei 2.
Hidayat,i R.i N.,i Handayani,i S.i R.,i &i Otok,i B.i W.i (2014).i Internationali Journali ofi Academici Research,i 6(4).
I.G.i Wallschutzky,i Possiblei causesi ofi taxi evasion,i “Journali ofi Economici Psychology”i 1984,i 5,i pp.i 371–384.
Iimi A. (2005), Decentralization and economic growth revisited: an empirical note. J. Urban Econ. 2005 doi: 10.1016/j.jue.2004.12.007.
Ismail, A.G.B. and Hamzah, M.Z. (2006), Fiscal Decentralization and Economic Growth Nexus: Evidence from Province-Level Cross-Section Data for Indonesia. Review of Islamic Economics, 10, 133.
Jackson,i B.i R.,i &i Millron,i V.i C.i (1986).i Taxi compliancei research:i Finding,i problemi andi prospects.i Journali ofi Accountingi Literature,i 5,i 125-165.
Kadenge,i J.i (2021).i Effecti ofi Taxationi oni Economici Performancei ai casei ofi Kenya.i
Keen, Michael & Mario Mansour (2010b), “Revenue Mobilisation in Sub-Saharan Africa— Challenges from Globalisation II – Corporate Taxation,” Development Policy Review, Vol. 28 (September), pp. 573–96.
Knack,i S.i a.i (1997).i “Doesi Sociali Capitali Havei ani Economici Payoff?i Ai Crosscountryi Investigation,”i .i Quarterlyi Journali ofi Economics,i ,i 112,i ppi 1251-88.
Landes,i D.i S.i (2018).i Thei Unboundi Prometheus:.i Cambridge,i Newi York:i Pressi Syndicatei ofi thei Universityi ofi Cambridge.i ISBNi 978-0-521-09418-4.
M.i Hanlon,iJ.iSlemrod (2007)i ani empiricali examinationi ofi corporatei taxi noncompliance,i Taxingi Corporatei Incomei ini thei 21sti Century,i eds.i A.i Auerbach,i J.i Hines,i J.i Slemrod,i Newi Yorki 2007,i pp.i 171–210.
Marthe,i Z.i (2014).i Takingi thei Modernizationi ofi Collectioni andi Managementi asi thei enginei toi promotei thei Modernizationi ofi Taxation.i Taxi Research,i 52-55.i (ini Chinese).
Martinez,i A.i L.i (2017).i Taxi aggressiveness:i ai surveyi ofi thei literature.i Journali ofi accountingi educationi andi researchi -i REPeC,i 11,i 106-124.
Milliron,i C.,i &i Jackson,i R.i (2018).i Taxi compliancei andi taxi moralei ini transporti sector.i Journali ofi Accountingi Literature,i 6(4),i 122-146.
Mills,i L.i (2017).i Barriersi toi increasingi taxi revenuei ini developingi countries.i Brighton:i K4Di Helpdeski Report.
MINECOFIN.Report.i (2018).i Appliedi Timei Seriesi Econometrics:i .i Kigali,i Rwanda:i Ministryi ofi Financei andi Economici Planning.
Mohd,i R.i M.i (2016).i Issues,i Challengesi andi Problemsi withi Taxi Evasion:i Thei Institutionali Factorsi Approach.i Schooli ofi Internationali Studies,i Universitii Utarai Malaysia.
Moore, M. (2015). ‘Tax and the Governance Dividend’. In Perspectives on Politics, Production and Public Administration in Africa, edited by A. M. Kjær, L. Engberg-Pedersen, and L. Buur, 159–172. Copenhagen: DIIS, Danish Institute for International Studies
Mugenda, A. G. & Mugenda, O. M. (2013). Research methods dictionary. Nairobi: Applied,
Mwangi,i P.i C.i N.i (2014).i Factorsi Influencingi Taxi Compliancei Amongi Smalli andi Mediumi Enterprisesi ini Nairobi’si Industriali Area,i Kenyai (Doctorali dissertation,i Universityi ofi Nairobi,).
Nijkamp, P., & Poot, J. (2004). Meta-analysis of the effect of fiscal policies on long-run growth. European Journal of Political Economy, 20(1), 91–12
Nnyanzi,i J.i B.i (2016,i December).i Regionali Economici Integrationi andi Taxi Revenue:i Easti Africani Community.i Journali ofi Economici Integration,i 31(No.4),i 1.
Oatesi Phillips,i K.i L.i (2005).i Provo,i Utah:i Brighami Youngi University.i Doesi Fiscali Decentralizationi Leadi toi Economici Growth,i 77-88.
OECD (2020) , The territorial impact of COVID-19: Managing the crisis across levels of government, http://www.oecd.org/coronavirus/policy-responses/the-territorial-impact-of-covid-19-managing-the-crisis-across-levels-of-government-d3e314e1/.
Pallant, J. (2020). SPSS Survival Manual: A Step by Step Guide to Data Analysis Using IBM SPSS (7th ed.). McGraw-Hill Education.
Peter,i B.i (2012).i Regionali integrationi andi taxi revenue:i Ai Casei Studyi ofi thei Easti Africani Communityi (EAC).i
Phillips,i M.,i &i Sandall,i R.i (2009).i Linkingi Businessi Taxi Reformi withi Governance:i Howi toi Measurei Success.
Pogorelov, V. (2018). Formation of the local self-government budgets in conditions of fiscal decentralization. Kyiv, PhD Dissertation.
Prest, A.R. and Barr. H. (1985). Personal Income Taxation, Public Finance Theory and Practice, 5 th Edition. London: E.L.B.S.
RRA.(2019,i November).i Taxi Handbook.i Retrievedi fromi https://www.rra.gov.rw/fileadmin/user_upload/rra_tax_handbook_november_2019.pdf.
RRA.i (2017).i Annuali taxi report.i Kigali:i Rwandai Revenuei Authority.
RRA.i (2017).i Officiali Gazettei ofi thei Republici ofi Rwanda.i Establishingi thei sourcei ofi Revenuei andi townsi andi itsi management.i Kigali:i Republici ofi Rwanda.,i 22.
Rwandai Revenuei Authority,i Taxi Statisticsi ini Rwandai FY2019/20,i Fourthi Editioni Junei 2021.
Shukla, Satishprakash, (2020) , Research Methodology and Statistics. Ahmedabad: Rishit Publications,
Spicer, Song, and Yarbrough (2004) ,i Abehaviorali model…;i M.i Spicer,i S.i Lundstedt,i understandingi taxi evasion,i “Publici Finance”i 1976,i 31i (2),i pp.i 295–305;i C.i Tittle,i Sanctionsi andi sociali deviance:i Thei questioni ofi deterrence,i Newi Yorki 1980;i A.i Riahi-Belkaoiu,i Relationshipi betweeni taxi compliancei internationallyi andi selectedi determinantsi ofi taxi morale,i “Journali ofi Internationali Accounting,i Auditingi andi Taxation”i 2004,i 13,i pp.i 135–143.
Twum,i B.i E.i (2014).i Gifti Taxi Compliancei ini Ghana,i ani Empiricali Study.i Journali ofi Financei andi Accounting,i 2(1),i 1-7.
Vazquez-Caro,i J.i &.i (2011).i Benchmarkingi taxi administrationsi ini developingi countries:i Ai systemici approach,i Internationali Centeri fori Publici Policyi Workingi Paperi Series,i ,i .i Internationali Centeri fori Publici Policy,i Andrewi You,i ati AYSPS,i GSUi paper1104.
Verdi,i M.i F.i (2016).i Manuali oni Taxi Collectioni andi Recovery.i Inter-Americani Centeri ofi administrationsi taxi (CIAT).
Worldbank.i (2021,i January).i Understandingi Povertyi i Retrievedi fromi https://www.worldbank.org/en/topic/taxes-and-government-revenue#1.
DOI: http://dx.doi.org/10.61426/sjbcm.v11i3.3022
Refbacks
- There are currently no refbacks.
This work is licensed under a Creative Commons Attribution 3.0 License.
PAST ISSUES:
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.