On Wednesday, members of the Chamber of Deputies endorsed the government’s suggestion to decrease the consumption tax on alcoholic beverages brewed using local raw materials.
The MPs enacted a draft law that Finance Minister Uzziel Ndagijimana submitted to Parliament earlier this month, reducing the rate of consumption tax on beers and wines made from raw materials generated locally.
Once released in the Official Gazette, the authorized law will reduce responsibilities levied on beers whose local raw material content, excluding water, is at least 70 percent by weight of their constituents.
The excise tax on beers will be set at 30%, down from the rate of 60%.
The same applies to wines.
The present consumer tax law, which has been amended, does not categorize the tax rate for wines or beers based on the origin of raw materials.
It sets the excise tax rate for beers at 60% and wines at 70%. These prices will be retained for brewed alcohol beverages using imported raw materials
Ndagijimana said the move is in line with the government’s strategy of promoting national investment and reducing imports.
“It will help spur domestic investment by giving Rwandan farmers a market,” he said early this month.
Ndagijimana asserted that once the amendments to the consumer tax law were released, large brewers in the nation like SKOL and Bralirwa would be urged to decide to use cereal agricultural products already discovered in Rwanda and work more with farmers to massively generate them.
“It will help because brewers like SKOL and Bralirwa may decide to use cereals found in Rwanda like wheat and sorghum as a result of this law,” he said.
If that is done, it means that the breweries could buy a lot of raw materials from Rwanda and this may promote agriculture here because they may use a lot of locally-produced agricultural products for their raw materials, the minister has said.
He also clarified that Rwandans are gaining from the modifications because cash spent on importing the raw materials will be spent in Rwanda.
“For cereal farmers, they may get market for their produce in the future as a result of this law because factories may change and use cereal products from Rwanda,” the minister said.
The New Times discovered that before the law was suggested to Parliament, the Rwanda Revenue Authority (RRA) consulted both SKOL and Bralirwa.
An excise or consumption tax is an indirect tax on the sale of a specific good or service like petrol, tobacco and alcohol.
Indirect implies that the tax is not paid directly by an individual customer — instead, the income collection authority levies the tax on the producer or merchant who passes it on to the customer by including it in the cost of the product.
In Rwanda, excise tax is currently levied on certain imported and locally manufactured goods such as fruit juices, lemonade, soda and other juices, mineral water, beers and wines, brandies, liquors and whisky, cigarettes, gas oil and premium, lubricants, some vehicles, as well as powdered milk and telephone communications.