3.4.6 Low literacy and lack of education
In Rwanda, the rate of literacy is rather low and there is
limited tax education. For an uneducated person, it is difficult to understand
the need for payment of taxes and duties. Taxes and duties are treated as
punishment. Low literacy level makes it even more difficult for tax
administration to educate taxpayers about their obligations. Many of the
options available to RRA to educate taxpayers, such as brochures, booklets and
information on the web become irrelevant when a large proportion of the
population is illiterate. Some unscrupulous taxpayers exploit the general low
literacy perceptions by not maintaining any business records or accounts when
in reality some of them are fully capable or literate enough to do so. RRA
needs to think of other methods to disseminate information such as running
face-to-face seminars and workshops.
3.4.7 Technological developments
The rise of e-commerce and internet communication is changing
the nature of business (for example, it can involve intangible goods such as
downloadable music), fraudulent scanning of commercial documents. This makes it
harder for Customs Services to track and account for transactions. The
deletion, hiding or encryption of electronic records by businesses also makes
it difficult for Customs Services to uncover and follow the audit trail through
Post Clearance audit.
3.4.8 Unemployment especially in border areas
In some cases, the unemployed are used to smuggle goods, for
example, high level of unemployment in border areas induce individuals to
smuggle goods and evade customs duties and other taxes collected at customs
border points.
3.5 Impact of Smuggling 3.5.1 Introduction
It is a founded belief that smuggling has a negative effect on
the state and business. Smuggled goods compete with legitimate goods and reduce
the profits of law abiding companies. They dodge taxes and lead to budget
revenue losses. If smuggling is not properly addressed, it may result into
organized groups who can use their profits to finance other illegal activities.
Smuggling incites corruption of state officials, customs and border control
officers and politicians.
In a nutshell, the Smuggling results into a situation where a
government is unable to mobilise resources to finance various economic
development undertakings that would result would break economic dependence
syndrome
3.5.2 Loss of revenue
Smuggling is an act of Customs offence which deprives
government of revenue for public investment expenditure. This lost revenue
would have been used to build more infrastructures, hire additional teachers or
purchase more medicines among others.
3.5.3 Distorts market prices and discourages
investment
Goods which are smuggled into the country are often sold a lot
cheaper than goods brought onto market through the right procedures. Smuggling
therefore deprives traders of free competition. Equally, Investors may fear to
invest in Rwanda as a result of unfair competition brought about by acts of
smuggling.
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