A Critical Analysis of Effectiveness of Tax Offences Control Mechanisms Under Rwandan Law

I.4.11 Attitudes and perceptions towards taxation

Among some taxpayers, tax morality is low and there is a strong culture to evade and avoid tax. In other words, there is no social disapproval or reprimand for commitment of tax offences. Often, this is exacerbated by the evasive actions of friends, relatives, co-workers and business colleagues. The perception of Tax offences as a crime is also low. This is not the view of only general taxpayers but also includes members of the judiciary who are inclined to pass lenient fines and sentences.

Some taxpayers do not also realise what the government is doing for them as a result of tax revenues and it is from here that the taxpayers escape from paying taxes in conformity to what they are due to pay.

I.4.12 Corruption among some tax officials

Corruption is present when public officials abuse their positions of public authority for private gain.^23(*) Such corruption undermines confidence in the tax system, negatively affects willingness to pay taxes, and reduces a country's capacity to finance government expenditures.^24(*) There is considerable potential for corrupt practices in revenue administration involving tax officers, taxpayers, importers and customs clearing agents.

Corruption in revenue administration can take many forms ranging from systematic - where individuals act together, to systematically support evasion (usually driven by senior staff) - to individual corruption, where staff either have `clients' whom they facilitate illegally or where they simply exploit their positions for financial gain. In addition, those involved in corrupt activities continually seem to be very inventive in finding new loopholes as some doors are being closed. Examples of corrupt activities include:

· Charging for services that should be free

· Speeding up of services (especially charging for faster clearance of goods)

· Charging for help to overcome complicated procedures and to qualify for exemptions or duty free treatment

· Turning a blind eye to non-registration for taxation, smuggling, and fraud (in customs, for instance, the declaration of false values supported by fraudulent invoices)

· Overstating values, over-assessing tax to instigate corrupt deals with importers and taxpayers

· Aiding taxpayers and importers in understating income and value of goods

· Selling insider information about competitors, profits, purchase costs, etc.

· Receiving payments to impede a competitor's business activities

· Diverting of cash, including issuing cheques for false repayment claims, for instance, value added tax (VAT) refunds

· `Losing' files that contain evidence of tax offences

· Facilitating or organising the smuggling of goods

· Receiving payment to complete tax returns for taxpayers or customs entries for importers

Our understanding of the nature of fiscal corruption has improved significantly over the last decade but it is still limited in several ways. Similarly, our understanding of the relative effectiveness of policy responses and anti-corruption strategies has also improved but is far from complete^25(*).

* ²³ Corruption, Fiscal policy and Fiscal Management: Fiscal Reform in Support of Liberalisation, June, 2006, P. 9

* ²⁴ An introduction to the Design and Development of Tax Policy in Developing and Transitional Countries, Richard M. Bird and Eric Zolt.

* ²⁵ Corruption, Fiscal policy and Fiscal Management: Fiscal Reform in Support of Liberalisation, June, 2006, P. 12