Effectiveness of Rwandan Law of Tax Administration in addressing Tax Offences

I.2. Concept of tax

A tax may be defined as any leakage from the circular flow of income into the public sector, excepting loan transactions and direct payments for publicly produced goods and services up to the cost of producing them. It is in effect a contribution designed to reduce private expenditure in favor public expenditure to enable the government to obtain funds in order to provide social and merit goods and services, redistribute income, clear market imperfections and stabilize the economy^10(*).

A tax may also be defined as an imposition of compulsory levies on individuals or entities by governments. Taxes are levied in almost every country of the world, primarily to raise revenue for government expenditures, although they serve other purposes as well^11(*).

Tax is generally referred to as a compulsory levy by the government upon assessment of various categories. H.L Bhatia (1999:37) defined tax as a compulsory levy payable by an economic unit to the government without any corresponding entitlement to receive a definite and direct quid pro quo from the government.

According to late professor Ray A, sommerfield of the University of Texas quoted James John Jurinski, said that tax is a non penal but compulsory transfer from the private sector to the public sector levied without receipt of a specific benefit.

According to Saleemi N.A (1981) tax is a compulsory contribution imposed by a public authority, irrespective of the exact amount of the service rendered to the taxpayer in return.

Also professor Seligman suggests that tax is a compulsory contribution from a person to the government to defray the expense incurred in the common interest of all, without reference to special benefits conferred.

A tax is defined as a compulsory levy imposed on the nationals and residents to meet expenses which are incurred by a government for the common cause (NA Saleemi 1991:2-4)

Tax may also be defined as a compulsory contribution of wealth of a person or body of person for service of public powers. It means taxes are a portion of the produce of the land and labour of a country placed at the disposal of the government.

Taxation can as well be defined by as a system where by the government imposes compulsory contribution for public purpose.

The above definitions points out or encompasses three main characteristics of the regime tax and the following deserves mention;

1. Tax is not levied for a return for a specific service rendered by government to tax payers. An individual can not ask for any special benefit from the government in return for the tax paid. It is referred to as a non- quid proquo payment (Saleemi 1998).

2. It is a compulsory contribution imposed by the government on people or companies. Because of its compulsory nature, those who do not pay it are reliable to being punished but it is to be paid by those who come under its jurisdiction (Cooper, krever and Vann's income taxation, commentary and Materials; fifth edition 2005).

3. It is a payment by tax payers which is used to benefit all the citizens a case in point the government use the collected revenues to establish infrastructures such as hospitals, schools as well as other public utility services.

It is believed that tax may be of different kinds as follows;

1. Exercise tax which is imposed on production of commodities;

2. There is also sales tax that is imposed on sale of commodities but in Rwanda it can be paid after sale such as VAT on some goods that may be imported.

3. Also there is income tax that is imposed on incomes of individuals and among others there is Pay as You Earn (PAYE) on employee's income.

4. Custom duty is another kind of tax that is imposed on imports or exports though in the exports are exempted from this tax

5. Further still there are fees that are paid for services rendered by the government directly such as import license, road license and so on.

* ¹⁰ Nicholas, T., Taxation in Kenya(Principles and Practices), 5^th Revised Edition, 3003

* ¹¹ http://www.britannica.com/EBchecked/topic/584578/taxation#tab=active~checked%2Citems~checked&title=taxation%20--%20Britannica%20Online%20Encyclopedia, 24/09/2008