MTN Rwanda in talks to settle $13.2m tax row

By BERNA NAMATA The EastAfrican
Posted Saturday, May 10 2014 at 17:05
IN SUMMARY
Rwanda Revenue Authority took MTN to the commercial court, accusing it
of "illegal computation" and seeking to recover the amount.
The two parties are discussing the matter, with a view to having the
revenue authority withdraw the case.
Telecoms giant MTN Rwanda is in talks with the revenue authority to
settle a Rwf9 billion ($13.2 million) tax dispute out of court.
In the case that started last year, the Rwanda Revenue Authority took
MTN to the commercial court, accusing it of "illegal computation" and
seeking to recover the amount.
The court ruled in favour of MTN Rwanda, but RRA has appealed the
ruling in the High Court.
The EastAfrican has learnt that the two parties are discussing the
matter, with a view to having the revenue authority withdraw the case.
"We are still negotiating and in some areas we have agreed, but the
process is still ongoing. We are not looking for compensation — our
interest is to have a good relationship," Paul Mugemangango, MTN
Rwanda's head of legal and corporate affairs said.
He added that MTN Rwanda is waiting for RRA to withdraw the case.
Sources familiar with the case say the tax dispute involves disclosure
of information regarding the financial support MTN Rwanda claims to
receive from its parent company, South Africa-based MTN Group.
RRA wants MTN Rwanda to disclose in its financial statements the exact
amount of support it receives from its parent company.
But Richard Tusabe, RRA Commissioner General, said that the government
has initiated talks to settle the matter amicably out of court, though
he maintained that the pending issues have to addressed.
"We are engaging the Ministry of Justice to pull out of court," he
said without disclosing further information.
The case is not an isolated one; RRA is currently moving to recover
approximately Rwf80 million ($117,569) in tax arrears accumulated over
the years including interest fees and penalties.
The tax body has now stepped up its recovery measures to include
confiscation of property.
"We are looking at the individual debtors. You find someone owes us
millions but has closed business. But the same person has four houses
in Nyarutarama [a Kigali suburb]. We have identified over 200
properties that belong to some of these defaulters and we have started
on the process of auction," Mr Tusabe said, adding that the tax body
is now profiling taxpayers.
Tax revenue
Total tax revenue collected in the July-December period of 2013
amounted to Rwf359.4 billion ($528.2 million), some Rwf13.3 billion
($19.5 million) lower than the Rwf372.7 billion ($547 million)
projected for this period.
This was attributed to a slowdown in economic activity in 2013 as GDP
growth was constrained at 4.6 per cent, instead of the 6.6 per cent
projected.
This, coupled with a contraction in spending, negatively affected
domestic demand and resulted in lower collections of direct and
consumption taxes.
Projected total tax revenue collections for the 2014/15 financial year
stands at Rwf906.8 billion ($1.33 billion) which is 15.8 per cent of
GDP, against a revised 2013/14 estimate of Rwf782.5 billion ($1.149
billion) or 15.3 per cent of GDP. This represents an increase of
Rwf124.3 billion ($1.86 billion).
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--
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