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

CHAPTER III. Recommendations for improvement

III.1. Legislative measures

Legislative control has to do with the nature and design of the tax laws, and the legal provisions and specifications that can be used to help RRA carry out its duties effectively and efficiently. Legislative control includes such things as anti-avoidance provisions; powers of access; review of the tax laws; penalties and sanctions; and tax amnesties.

III.1.1 Simplifying and amending the law

A well-drafted tax law spells out with precision the matters that are within its scope. But precision is not enough. A law should not be precise at the expense of being complicated and impossible to understand. The easier a tax law is to understand, the lower will be the compliance costs, both for taxpayers and for tax administrators.^64(*)

It is commonly known that good compliance outcomes begin with good legislation. Law that is clear and unambiguous with regards to its intent and interpretation provides a solid base upon which to build administrative compliance programmes and compliance risk management. Difficult or ambiguous law creates increased opportunities for taxpayers to behave in ways that were unintended by the law. In many ways, good law underpins the tax authority's ability to deliver procedural fairness in the conduct of its administration. If taxpayers perceive the law to be unjust or inappropriate, inevitably, there is an increased risk of non-compliant behaviour.

RRA should continue to propose reviewing tax laws with the intention of reducing complexity and burden on both taxpayers and the tax administration. Simplified legal instruments [should be put] in place and accessed through multiple channels^65(*)

However, it should be noted that simplification are often taken over by the piecemeal amendment of the tax laws to close loopholes that taxpayers have taken advantage of to avoid tax. This may actually lead to increased complexity rather than simplification and in some cases further increases the opportunities for Tax offences.

It is also important to remember that it is not just simplification of the tax laws in isolation that can encourage compliant behaviour. There are other regulations and restrictions imposed by other Government agencies such as RIEPA, RBS, etc that can also be simplified to provide incentives for taxpayers to comply. For example, even if the tax laws are simplified, if processes required to register a business are still onerous, taxpayers will not have an incentive to register their business in the first place.

III.1.2 Strong investigative powers

Strong powers of access to buildings, places, files and documents are highly important to the efficient and effective operation of tax and Customs inspectors. In fact, strong powers of access are rated as one of the most effective measures they use to combat Tax offences. These powers of access are stipulated by the tax and customs laws

III.1.3 Powers to seize of remove materials

Often access powers are not sufficient to enable Tax and Customs Auditors to carry out their duties. For example, where the investigator may wish to access large documents which require lengthy periods to read or copy, or where the investigator fears that materials or documents may be destroyed or altered if they are not copied or removed immediately. In response, Tax and Customs auditors should seize or remove materials or take possession of books and other relevant items where the officer is of the opinion that the records:

· Cannot reasonably be inspected without taking possession of them; or

· May be interfered with or destroyed unless possession is taken; or

· May be needed as evidence.

* ⁶⁴ Law Design and Drafting(Volume I; IMF; 1996, Victor Thuronyi, ed)

* ⁶⁵ RRA Strategic Plan, 2009-2010, P. 14.