Rwanda publishes its eighth tax expenditure report

The Rwandan Ministry of Finance and Economic Planning (MINECOFIN) has published its FY2024-25 Tax Expenditure Report as part of the FY2026–2029 Executive Budget Proposal.  Marking the eighth consecutive year of tax expenditure reporting, it highlights the Government's commitment to fiscal transparency.

The long-standing collaboration between MINECOFIN and the Rwanda Revenue Authority (RRA) – supported by TaxDev, the International Monetary Fund (IMF) and Agence Française de Développement (AFD) Group – has strengthened estimation methodologies, analytical capacity, and institutionalised reporting in Rwanda's budget process. This year's report adds tax expenditure forecasting and deepens analysis of income tax expenditures, VAT expenditure incidence, and climate-related tax expenditure tagging.

Key findings include:

• Total tax expenditure is estimated at Rwf 756.0 billion (3.8% of GDP, compared with 3.6% in the previous fiscal year).
• Revenue forgone remains highly concentrated in VAT (Rwf 411.6 billion; 54% of total tax expenditures; 2.1% of GDP) and Customs (Rwf 291.9 billion; 39% of total tax expenditures; 1.5% of GDP). Income tax expenditures comprise Rwf 52.5 billion (7% of total, or 0.3% of GDP).
• Growth was driven by VAT and Customs duties exemptions for electric and hybrid vehicles, increasing by 188% and 183% respectively compared to the previous year. VAT revenue forgone was also driven by a 133% increase in zero-rated international transport services for goods.
• Income tax expenditures increased mainly due to a 397% increase in revenue forgone from the seven-year tax holiday for very large investments compared with the previous year.

The report also provides important context for interpreting these estimates. Tax expenditure figures measure revenue forgone, not necessarily implying ineffective tax policy. They represent costs to be assessed against economic and social benefits. Many measures in Rwanda are designed to lower the cost of essential goods and services, support priority sectors, encourage investment and simplify tax administration.

Tax expenditures are expected to decline in FY2025/26 following recent tax policy reforms that were informed by tax expenditure reporting. Removing VAT exemptions on fuel, road transport and mobile telephones, while narrowing others, such as fee-based financial services, will broaden the tax base and strengthen domestic revenue mobilisation.

Supervised by Abel Ntegano (MINECOFIN) and John Karangwa (RRA), the report was produced by a joint team of analysts from both institutions with continued technical support from TaxDev. The team consisted of Elysee Nyuzwenimana, Lucie Niyigena, Israel Bikorimana, Enock Mwizerwa, Lisa Yvette Inyange, Albert Ndahimana, Francois Uwizeye, Nathalie Umwali, Florien Tuyizere, Celestin Niyomugabo, Niyigena Albert, Umuhire Ingabire Grace (Ukwezi), Pierre Ntakirutimana, Jean Claude Nyshimiyimana, Clement Harushyubuzima, Francois Hakizimana, Harshil Parekh and Balint Van.

The full report can be accessed at: Tax Expenditure Report FY2024/25.