Contribution of Cooperatives to Social-Economic Development in Rwanda
Jean Bosco Harelimana* and Berna Mukarukaka
Ruhengeri Institute of Higher Education, Musanze, Rwanda
Received Date: 22/04/2020; Published Date: 29/05/2020
*Corresponding author: Jean Bosco Harelimana, Ruhengeri Institute of Higher Education, Musanze, Rwanda, P.O.B. 155 Musanze, Rwanda
Cite this article: Jean Bosco Harelimana, Contribution of Cooperatives to Social-Economic Development in Rwanda. Op Acc J Bio Sci & Res 1(3)-2020.
Rwanda has put strategies in place for social-economic transformation of Rwandans basing incorporate with Sustainable Development Goals (SDGs). This paper is purposely to examine the contribution of cooperatives to social-economic development of Rwanda and to achieve that objective, contributions were revealed basing on five (5) sustainable goals areas which are End poverty, Empower girls and women and achieve gender equality, Provide quality education and lifelong learning, Ensure healthy live, Ensure food security and good nutrition, Ensure stable and peaceful societies. The study used descriptive analysis from different Rwanda Cooperative Agency (RCA) reports and literature review of different published papers. The findings of this paper proves there is big contributions of cooperatives towards social-economics development of Rwanda for all SDGs picked-up by this study, however this paper pointed limitation to growth of some cooperatives and this study recommend further research on role on cooperatives in Rwanda with use of econometric model, since this paper used descriptive analysis.
Keywords: Cooperatives; Socio economic development; Sustainable Development Goals
Over 200 years cooperatives movement is increasing the importance to the economies and societies to the world and as well United Nations acknowledged cooperatives as effective strategy to improve their lives while contributing to the economic, social, cultural and political advancement of their community and nation . According to Carrell, Grigore & Alina-Aurelia , earliest cooperative movement started on 14th march 1716 in Scotland with 15 men signed to be "honest and Faithfull to one another and to make good & sufficient work and exact neither higher nor lower prices than are accustomed", as time passes cooperatives are spread in the whole world which is consider as backbone for social-economic development and according to ICA ,12% of world population are cooperative members and it reports on analysis of contribution of 300 largest cooperatives and mutual organization to UN Sustainable Development Goals and finding revealed that by 2019 300 top cooperatives generated 2034.98 billion USD turnover and as well currently cooperatives employs 280 million people across the global which estimated to 10% of people employed in cooperatives and this demonstrates the vital role of cooperatives in contribution to social-economic developments of nations.
Cooperatives in Africa has been recognized as tool for poverty reduction and trend of cooperatives registration in Africa is upward trend, according to Develtere & Pollet, Ignace pollet  suggest that over seven per cent of the African population is affiliated to primary cooperatives have been confirmed and most countries have hundreds of new cooperatives registered every year. Cooperatives approach in Africa was revealed as contributed much in achieving Millennium Development Goals and the promotion of decent work in Africa by promoting self-help initiatives, mutual assistance in communities.
According to Ortmann & King, Mhembwe & Dube  Cooperatives play a significant role in improving the livelihoods of communities in the world, of which are agents of sustainable development of most developing country and according to previous studies, Schwettmann & Mhembwe & Dube , revealed that 40% of household in Africa are members of cooperatives. Cooperatives’ members are beneficial from each other socially and economically as well as country’s economy boost through business oriented cooperatives. Cooperatives managed to pull together all people with small resources to manage to come with needed business for economic development and better standards of living and as well creation of employment for members and non-member benefit, agriculture is larger sector engages in cooperative in most of African countries. According to ILO , in Ethiopia, 900,000 people in the agricultural sector are estimated to generate most of their income through their cooperatives. This paper is purposely focus on cooperative movement in Rwanda and more specific to contribution of cooperatives to soocia-economice development.
Cooperative movement in Rwanda started in 1949 since then cooperatives remained control under political interest until policy of promotion for cooperatives amended by 1988 and in 2018 the policy was revised again and entitle as National policy cooperative in Rwanda . Most of Rwandans are doing businesses through cooperative, currently Number of cooperatives registered are estimated to be 10,025 cooperatives and members estimated to be 4,872,729 People with share capital estimated as 49,797,022,184 Frw and cooperatives are categorized basing on ten main economic sector in additional to saving and credit cooperatives (SACCOs) . Rwandan Cooperatives are private entities with legal personality which are regulated by government institutions. Rwanda cooperative Agency (RCA) is currently having mandate of developing cooperatives sector with back up of other government institution as National policy on cooperatives in Rwanda  declared the roles of stakeholders in cooperative movement. Rwandan cooperatives structured into Primary cooperatives, union, federation and confederation at National level.
Rwanda’s cooperative sector has grown rapidly over the last ten years. This has been achieved through the support of Government of Rwanda, which has always given emphasis to the development and promotion of cooperatives to facilitate their activities and enhanced the structure of the cooperative movement in Rwanda. The government established Rwanda cooperative Agency to accelerate cooperative development in Rwanda. Precisely, RCA has three main mandates namely: Promotion, Registration and Regulation of Cooperatives. Since 2005, the Government of Rwanda has heavily invested in the Cooperative sector and 43.5 % of populations are engaged in cooperatives. Cooperatives are regarded as good mechanisms for pooling together people's meager resources with a view to helping them have enough capital for easy business operations and transactions. It is important to note that cooperatives are central to the approach of poverty alleviation and are therefore regarded as the basic pillar for economic empowerment. However, some cooperatives are still encountering challenges both externalities and internal challenges which are caused poor financial management of some cooperative. This paper is purposely to reveal the snapshot of contribution of cooperatives to in Rwanda.
Structure of cooperatives movement in Rwanda
The cooperative organizations are currently under hierarchical structure from primary cooperative, unions cooperatives, federations cooperatives and confederation cooperatives are formed complying both national cooperative policy and cooperative law. According to ICA , Cooperatives are built on seven principles of which adopted by principles of cooperatives as well as all Rwandan cooperatives comply with both principles (Voluntary and Open Membership, Democratic Member Control, Member Economic Participation, Autonomy and Independence, Education, Training and Information Cooperation among Cooperatives and Concern for Community) and Rwandan cooperative law. 9423 Primary cooperatives, 150 Union cooperatives, 15 Federation cooperatives and 473 SACCOs registered in Rwanda cooperative .
Figure 1 Represents trend of primary cooperatives since 2010, it is increasing trend which demonstrates in 2010, only 2588 cooperatives were registered and by December 2019 active cooperative increased to 9427 which implies how cooperatives are vital in Rwandan economy. Among the primary cooperative, majority of cooperatives are from agricultural sector which counts 27.1% of which is demonstrated in Figure 2 and least percentage are fishery cooperative with 0.9%. Union cooperatives counts 1.5%, federations cooperative 0.1% and Saving and credit cooperatives (SACCOs) represents 4.4% of cooperative registered in Rwanda.
Figure 1: Cooperative distribution since 2010-2019.
The challenge is to tax a larger number of citizens and enterprises more consensually. This is not an easy task. The dominant approach to improving tax collection has been to focus on enhancing administrative capacity.
Contribution of Cooperatives to SDGs
This paper focused on both social and economic benefits of cooperative gained by members of cooperatives, entire community and as well benefit to Rwandan government. According to ILO , cooperative are highly relevant and important in contributing to achievement of twelve Sustainable development goals (SDGs).This section is briefly demonstrates contribution of Rwandan cooperatives to SDGs goal but this paper focused on five goals which are:
a. End poverty
b. Empower girls and women and achieve gender equality
c. Provide quality education and lifelong learning
d. Ensure food security and good nutrition.
e. Ensure stable and peaceful societies.
Cooperatives played big role in poverty reduction and it has been good approach to end poverty of all forms and everywhere. Rwanda was marked as faster growing economy country on continent with strong enforcement of strategies of poverty alleviation, cooperatives helped to bring people with shared capital and start-up business of which every member is equally gain from. Table 1 demonstrate the increment of both participants and share capital since 2010-2019, from 238,353 members with share capital of 5,178,550,576 Frw in 2010 to 1,839,956 members with 31,881,597,219 Frw in 2019. This reveals the cooperatives contribute to poverty reduction as there is increment of investments made in cooperative which implies that members are gaining from this investment which helps them to upgrade to better standard of life.
Cooperatives contributed financial security through job creation and access finance through loan to both members and to the community in general, most cooperatives are solution to unemployment rate. Umurenge SACCOs are source of permanent job creation and as well as source for start-up of owned businesses through access to finance (credit), all 437 SACCOs country have employed Managers, accountant Cashiers, Loans officers, Loan recoveries, fichiers, security gaurd and other employee basing on each need of SACCOs and 416 U-SACCO have employed many fulltime employees, each U-SACCO estimated to have 8 fulltime employees and it is estimated to 3328 employee across the country. This implies that cooperative contributed a lot on job creation and financial security as well as well- being of Rwandans
Table 1: Cooperatives status (2010-2019) in Rwanda.
Table 2 demonstrates gross loan issued assets of SACCOs, Deposits and Profit made by September 2019 in each province. This implies members of SACCOs either invested loan or loan issued helped resolve issues for better standards of living, according to Quach  revealed positive significant between credit borrowing and household welfare though credit borrowing is not only tool for poverty reduction, it also require plan of investing credit for profit making.
Table 2: Financial status of SACCOs.
Figure 3 shows the trend of saving in Umurenge SACCOs in Rwanda since 2010-2019. It demonstrates dramatic increasing of saving of members. This means that Rwandans are financially inclusive with more savings of which SACCOs contributed a lot, according to FinScope in 2008 only 48% of populations were financially included and in 2016 report revealed that 89% of adult Rwandans are financially included and a large portion of the increase can be assigned to the Umurenge SACCO program. This implies that viability of savings through cooperatives contributed to poverty reduction in Rwanda.
Figure 3: Trend of savings in SACCOs in billion.
Empower women and gender equality through Cooperatives
Rwanda has been role model in powering women on the content and also women are empowered through cooperatives, Table 3 demonstrates by Feb, 2020 female registered were 2,327,172 which are estimated to 44.7%. In Rwandan cooperative movement have empowered women to work together, there are many women cooperatives and through Rwanda cooperative Agency and other stakeholders have empowered by educating women to be fearless to business and managing cooperative with intent of profit making. According cooperatives law, election of cooperative of cooperative must consider gender equality. Through empowering women, Rwanda cooperative Agency together with other stakeholder trained 30 women cooperatives in Kigali city and 58 cross border women cooperatives on financial management, marketing and negotiation . According to RCA , out of 552 assessed cooperatives the membership, Figure 4 showed an increase of 36% of membership in cooperatives since 2005. 52% of increase was female and 25% of that increase is male. This proves how Rwanda cooperatives contribute much in empowering women with respect to gender.
Qualitative and quantitative approach was used. In quantitative approach the researcher employed data in form of numbers collected from employees in RRA. Qualitative is used through interviews in order to establish the effect of Value added tax Reforms on Revenue Performance in Rwanda. The target population is 2791 small taxpayers and 109 medium active taxpayers registered on VAT tax under the domestic taxes department Kicukiro block, and the 6 staff from RRA Kicukiro block. Hence the total target population is 2906 respondents.
Table 1: Sample size determination.
a. Data collection instruments
Primary data was collected through scheduled interviews with the identified managers. The researcher also employs the use of email questionnaires to fit into the need for convenience for the busy managers. A structured questionnaire with both closed ended and open-ended questions is used to use to guide the interview. Secondary data was obtained from a desk top analysis that reviewed published reports, newspapers, financial journals industry regulatory laws and investor briefing reports. The study collected secondary data on revenues generated by online filling, use of EBM and VAT refund for the period 2015 to 2019.
Results and Discussion
This chapter presents data analysis as obtained from the field survey. Presentations are given in terms of tables of means and standard deviations in case of descriptive statistics. Inferential statistics was carried out with Statistical Package for Social Science (SPSS) Version 21. Thereafter a brief description of the findings and discussion of findings per objective will follow.
i. Data presentation
The study administered 352 questionnaires to the targeted respondents. The response rate of the respondents is expressed and as indicated, the number was sufficient enough to support requisite analysis of data and could be relied upon to make accurate findings and conclusions. According to Mugenda & Mugenda , a response rate of above 70% is acceptable in research. Babbie asserted that return rates of 50% are acceptable to analyze and publish, 60% is good while Fowler stated that 70% is very good. Hence the 100% response rate is deemed the best response.
ii. VAT reforms on the use of EBM
The analysis concerned the VAT payment, running regression analysis to see patterns of adoption and the impact of EBMs on receipts to the revenue authority. This was complemented with a small-scale ‘mystery shopper’ study, where the behavior of firms with active EBMs was observed to capture compliance, price effects, and reasons for non-compliance.
Table 2: The use of EBM.
Among the contacted respondents, 26.7% of respondents agreed that EBM helped a lot in VAT collection, 40.5% of respondents strongly agreed because of promises of employment and good education; 16.4% disagreed with the statement that EBM helped a lot in VAT collection, 4.1% strongly disagreed that youth in Rwanda are mostly lured into trafficking by promises of good education and employment, 12.3% remained indifferent; and the standard deviation at 2.35 to show the heterogeneity of responses. Evidence from Brazil suggests that such a consumer audit can significantly increase receipt issuing, and that this initiative increased VAT yields by around 22% over four years. However, provision of such incentives can be expensive, and their functionality will depend strongly on the appropriate policy design. In addition, among the contacted respondents, 23.6% of respondents agreed that The use of EBM helped in clearing, 50.3% of respondents strongly agreed that the use of EBM helped in clearing, 21.5% disagreed that the use of EBM helped in clearing, 1.5% strongly disagreed that the use of EBM helped in clearing, 3.1% remained indifferent; and the standard deviation at 2.10 to show the heterogeneity of responses.
Among the contacted respondents, 29.7% of respondents agreed that before use of EBM it was very difficult to collect revenue, 45.6% of respondents strongly agreed with the statement that before use of EBM it was very difficult to collect revenue. 12.3% disagreed that the majority with the statement that before use of EBM it was very difficult to collect revenue. 6.7% strongly disagreed that before use of EBM it was very difficult to collect revenue 5.6% remained indifferent. The standard deviation was at 2.13 to show the heterogeneity of responses.
Lastly, among the contacted respondents, 43.1% of respondents agreed that VAT clearance was difficult to comply before the introduction of EBM. 48.2% of respondents strongly agreed that VAT clearance was difficult to comply before the introduction of EBM. 0.5% disagreed that VAT clearance was difficult to comply before the introduction of EBM. 4.6% strongly disagreed with therefore mentioned statement. 3.6% were indifferent. The standard deviation was at 1.77 to show the heterogeneity of responses. These results are in harmony with those of Nada  regarding the incidence and impact of EBM for VAT in Rwanda; they concluded that the adoption of an EBM has a statistically and economically significant impact on VAT payments, raising these by an average of 6.5%. The study finds that adoption has spread quickly and reached 77.8% of tax-paying firms but was slowing. The average impact of EBM on firms’ VAT payments was estimated at 5.4%. Estimated impacts vary substantially by sector and size. The mystery shopper study found that - at least for low-cost goods in Kigali retail stores - EBM utilization is low, but utilization increased substantially when consumers requested a receipt – and with utilization revenues increased. Taken together, the findings suggest that future strategies could appropriately be focused on concentrating the expansion of EBM coverage on specific sectors where both adoption rates are low and potential impacts are highest, while building on existing policies to strengthen firms’ incentives to report transactions through EBMs.
The study was conducted to empirically determine whether use of EBM was a significant determinant of Revenue Performance in Rwanda. From the findings, it could then be concluded that there is a moderate positive linear relationship between the two variables since the correlation coefficient is between 0.4 and 0.6 according to Dancey and Reidy's categorization.
Table 3: The use of EBM versus Revenue Performance.
The results indicate that Use of EBM is significantly correlated to the Revenue Performance in Rwanda (r=0.518, p<0.01). There is a Strong positive relationship between Use of EBM and Revenue Performance in Rwanda as indicated by correlation of 0.518. This shows that the sampled data can be applied to the general population across RRA at 95% confidence level. Use of EBM was a significant determinant of Revenue Performance in Rwanda. Regression results in Table 8 indicate the goodness of fit for the regression between use of EBM and Revenue Performance in Rwanda was satisfactory in the linear regression. An R squared of 0.312 indicates that 31.2% of the variances use of EBM and Revenue Performance in RRA are explained by the variances in use of EBM in the linear model. The correlation coefficient of 51.8% indicates that the combined effect of the predictor variables has a positive correlation with Revenue Performance in Rwanda.
Table 4: Model summary.
Result review that use of EBM is statistically significant in explaining Revenue Performance in Rwanda Revenue authority. An F statistic of 5.020 indicated that the combined model was significant. From the analysis, a p-value less than 0.05 (p-value =0.0000) was obtained. This implies that the simple linear model with use of EBM as the only independent variable is significant.
Table 5: The effect of use of EBM on Revenue Performance.
The results show that use of EBM (X1) is significant (p-value = 0.0000) in influencing Revenue Performance (Y). The results of the analysis are shown in Table 4.8 and the fitted model from this analysis is shown below:
Y= 2.487 + 0.342X1
Table 6: The relationship between the use of EBM and Revenue Performance.
The aggregate data relating to VAT revenue collected from employing techniques such as audits, imposing penalties and instituting legal sanctions for fraudulent taxpayers was regressed against VAT revenue collections as a measure of the GDP. There is a strong significant relationship between the predictor variables (Audit rate penalties, criminal sanctions, contribution of imports to VAT).
Table 7: The administrative fines.
The 28.7% of respondents agreed that because of administrative fine the VAT is paid on time, 41.5% of respondents strongly agreed that because of administrative fine the VAT is paid on time. 25.6% disagreed that because of administrative fine the VAT is paid on time. 3.6% strongly disagreed that because of administrative fine the VAT is paid on time. 0.5% were indifferent. The standard deviation was at 2.06 to show the heterogeneity of responses. These findings are consistent with Keen & Mansour  research that looked at the current challenges in revenue mobilization; Improving tax compliance. The research found a close relationship between audits as an enforcement strategy for tax compliance. The 49.2% of respondents agreed that electronic bill is issued to customers because of fear of administrative fine, 44.1% of respondents strongly agreed that electronic bill is issued to customers because of fear of administrative fine. 4.1% disagreed that electronic bill is issued to customers because of fear of administrative fine, 2.1% strongly disagreed electronic bill is issued to customers because of fear of administrative fine. 1.0% were indifferent. The standard deviation was at 1.61 to show the heterogeneity of responses.
The 55.9% of respondents agreed that account books are kept up to date because of fear of administrative fine, 34.4% of respondents strongly agreed that account books are kept up to date because of fear of administrative fine, 6.2% disagreed that account books are kept up to date because of fear of administrative fine, 3.6% strongly disagreed that account books are kept up to date because of fear of administrative fine, 0.0% were indifferent. The standard deviation was at 1.61 to show the heterogeneity of responses. The 48.7% of respondents agreed that Administrative fine is so high that nobody can’t mess with VAT no-compliance, 43.1% of respondents strongly agreed that Administrative fine is so high that nobody can’t mess with VAT no-compliance. 2.1% disagreed that Administrative fine is so high that nobody can’t mess with VAT no-compliance. 5.1% strongly disagreed that Administrative fine is so high that nobody can’t mess with VAT no-compliance. 1.0% were indifferent. The standard deviation was at 1.67 to show the heterogeneity of responses. These results are somehow in line with those of Kirchler who found that deterrence is effective when there is a combination of effective imposition of fines and frequent audits to detect cases of non-compliance and to conclude that penalties and audit probabilities have a strong impact on tax compliance.
Table 8: The analysis of administrative fines on the revenue performance.
The results show that the Administrative fines is significantly correlated to the Revenue Performance in Rwanda (r=0.681, p<0.01). There is a Strong positive relationship between Administrative fines and Revenue Performance in Rwanda as indicated by correlation of 0.681. This shows that the sampled data can be applied to the general population across RRA at 95% confidence level. Compared to prior studies the result is not unexpected. Prior studies have set forth conflicting relationships between penalties and VAT revenue. The study of Eissa & Jack  also found no significant variations in the various tax compliance measures on VAT revenue for large and small firms in Kenya. Administrative fine was a significant determinant of Revenue Performance in Rwanda. Regression results indicate the goodness of fit for the regression between Administrative fines and Revenue Performance in Rwanda was satisfactory. An R squared of 0.282 indicates that 28.2% of the variance’s Administrative fines and Revenue Performance in RRA are explained by the variances in Administrative fines in the linear model. The correlation coefficient of 68.1% indicates that the combined effect of the predictor variables has a positive correlation with Revenue Performance in Rwanda.
Table 9: Model summary.
Results review that Administrative fines is statistically significant in explaining Revenue Performance in Rwanda Revenue Authority. An F statistic of 4.17 indicated that the combined model was significant. From the analysis, a p-value less than 0.05 (p-value =0.0000) was obtained. This implies that the simple linear model with Administrative fines as the only independent variable is significant.
Table 10: Administrative fines on Revenue Performance.
The results show that Administrative fines (X2) is significant (p-value = 0.0000) in influencing Revenue Performance (Y). The results of the analysis are shown in Table 19 and the fitted model from this analysis is shown below:
Y= 0.755 + 0.331X2
In this section, the study sought to determine the extent in which the respondents agree with aspects on taxpayers training on revenue performance. The findings are presented below.
Table 11: Taxpayers training.
The results indicated that among the contacted respondents, 37.9% of respondents agreed with the statement that All taxpayers are trained in VAT filing, 52.8% of respondents strongly agreed with therefore mentioned statement. 4.1% disagreed with the statement, 5.1% strongly disagreed while none was indifferent. The standard deviation was at 0.76 to show the heterogeneity of responses. In addition, 30.8% of respondents agreed that the use of EBM has been dispensed to all VAT taxpayers who have it, 44.6% of respondents strongly agreed to the afore mentioned statement while 5.1% disagreed with the statement as 12.3 strongly disagreed with the statement and 2.26% were indifferent. The standard deviation was at 1.30 to show the heterogeneity of responses. Furthermore, among the contacted respondents, 24.1% of respondents agreed that All VAT taxpayers are familiar with the VAT clearing, 63.1% of respondents strongly agreed that those who fall victims of human trafficking are peasants while 9.2% disagreed with the afore mentioned statement, 3.6% strongly disagreed with the statement while none were indifferent. The standard deviation was at 0.69 to show the heterogeneity of responses.
The contacted respondents, 40.5% of respondents agreed that VAT taxpayers has been trained in the role of paying tax and the fine that incurs in case of no-compliance, 36.4% of respondents strongly agreed with the statement while 16.9% disagreed with the statement, 1.5% strongly disagreed with the statement, 4.6% were indifferent and the standard deviation was at 1.03 to show the heterogeneity of responses. The same Table 4.42 showed that 36.4% of respondents strongly agreed, 40.5% of respondents agreed; the mean was very high at 1.93 and confirmed the strong evidence of the fact; the standard deviation at 1.03 to show the heterogeneity of responses.
According to Fjeldstad and Ranker, taxpayer education exists to encourage voluntary compliance through service delivery to taxpayers. Low levels of voluntary tax compliance will compel revenue authority to use costly and coercive methods to enforce compliance. These findings have similarity with those of Singh who viewed tax knowledge as one of the key factors in tax compliance hence has a very close relationship with the taxpayers' ability to understand the tax law & regulations, and their ability to comply.
History of the Diseases
The analysis was conducted to empirically determine whether Taxpayers training was a significant determinant of Revenue Performance in Rwanda.
Table 12: Taxpayers training versus revenue performance.
The findings indicate that Taxpayers training is significantly correlated to the Revenue Performance in Rwanda (r=0.656, p<0.01). There is a Strong positive relationship between Taxpayers training and Revenue Performance in Rwanda as indicated by correlation of 0.656. This shows that the sampled data can be applied to the general population across RRA at 95% confidence level. Taxpayers training were a significant determinant of Revenue Performance in Rwanda. Regression results in Table 18 indicate the goodness of fit for the regression between Taxpayers training and Revenue Performance in Rwanda was satisfactory in the linear regression. An R squared of 0.285 indicates that 28.5% of the variances Taxpayers training and Revenue Performance in RRA are explained by the variances in Taxpayers training in the linear model. The correlation coefficient of 65.6% indicates that the combined effect of the predictor variables has a positive correlation with Revenue Performance in Rwanda.
Table 13: Model summary on Taxpayers training versus revenue performance.
Result review that Taxpayers training is statistically significant in explaining Revenue Performance in Rwanda Revenue authority. An F statistic of 4.854 indicated that the combined model was significant. From the analysis, a p-value less than 0.05 (p-value =0.0000) was obtained. This implies that the simple linear model with Taxpayers training as the only independent variable is significant.
Table 14: Taxpayers training versus revenue performance.
The mean for those three variables varies from 4.33 to 4.44 which means that many of the respondents agreed and strongly agreed with the statement regarding each variable. For the variable VAT collection performance, the min was 2 and the max was 5; this implies that among respondents some disagreed with the statement and some were undecided. The mean in this case was 4.38 which show that a great number agreed and strongly agreed with the statement regarding project sustainability. The standard deviation varies from 0.56 to 0.66. This means that there was a certain low degree of heterogeneity in the answers of respondent.
Since the introduction of EBM, the revenue from VAT has been increased, the payment of VAT has been facilitated by using EBM, since the introduction of high administrative fine, the revenue increased and the knowledge of taxpayers contributed in increasing revenue.
Table 5.7: Overall domestic taxes department collection in RRA.
The study relates to a study done by Asirigwa where she looked at determinants of revenue and analyzed that increase in rate of tax does not lead to increase in revenue as consumers don’t react according to how the economy wants them to but according to their purchasing power this relates to the study as VAT refunds though are seen as an improvement to collecting more revenue ends up causing a decline in revenue as money is going out and its main aim is maintain the confidence of the taxpayer in respect to transparency.
Table 23: Rwanda Revenue Authority performance Kicukiro block.
Tax knowledge has been identified as the main determinant of tax compliance. Previous research found that the tax knowledge is positively correlated with taxpayers’ ability to understand that tax laws and other financial regulations hence their ability to comply with them. On the hand, Ericsen, and Fallan found that knowledge of tax is correlated with taxpayers’ attitude and perception and positive tax behaviour can be improved by better understanding of the tax laws. To further investigate the impact of tax knowledge on taxpayer compliance in the context of Rwandan taxpayers, the respondents were asked to respond to the question of whether taxpayers have enough tax knowledge about their tax obligations and entitlements towards VAT reforms. According to the USAID the principles and tax codes must clearly cite and describe the basic provisions of taxation to provide the basic legal authority to the tax administration to collect taxes. The operating business must comply with the legal requirement and register for tax purposes in 7 days from the beginning of the business or activity or the establishment of the company according to article 10 of law n◦ 16/2005 . From the study in both small enterprises and medium enterprises have been increasing due to VAT tax reforms [12-30].
Table 15: Model Summary.
The ANOVA results for regression coefficient indicate that the significance of the F is 0.00 which is less than 0.05. This implies that there is a positive significant relationship between VAT reforms versus revenue performance and that the model is a good fit for the data. Therefore, the Alternative Hypothesis H1is accepted and the null Hypothesis (H01) is rejected and a conclusion reached that, at 5% level of significance, VAT reforms significantly influence the revenue performance [31-40].
Table 16: Coefficient results.
The Table 26 shows the beta coefficients of the model. It helps to appreciate how much every independent variable contributes to the prediction of the dependent variable. One should notice that 0.05 > p (t) for all variables which means that every independent variable counts in this model [41-49].
From the table above the regression equation may be written as follow:
The regression model demonstrates that a unit increase in use of EBM increases VAT collection performance by 0.576 units, while other variables remain constant. One unit increase in administrative fines would increases the VAT collection performance by 0.289 units if other variables remain constant. Finally, a unit change in taxpayers training would increase VAT collection performance by 0.130 units, while other variables stay constant.
The regression model demonstrates that a unit increase in use of EBM increases VAT collection performance by 0.576 units, while other variables remain constant. One unit increase in administrative fines would increases the VAT collection performance by 0.289 units if other variables remain constant. Finally, a unit change in taxpayers training would increase VAT collection performance by 0.130 units, while other variables stay constant.
Based on the information drawn from findings the researcher concluded that the effect of use of EBM on VAT collection performance is significant. It was found out that the VAT collection could not succeed at a significant level without use of EBM and that the increase of one unit in use of EBM increases the performance of VAT collection by .576 units if other variables remain constant. This study demonstrated that there is a strong relationship between administrative fine and VAT collection performance. The study found out that administrative fines have a great effect on VAT collection performance in Rwanda. It showed that the increase of one unit in administrative fine would increase the VAT collection performance by .289 units if other variables remain constant. Moreover, it showed that this variable is a very important factor in VAT collection, the correlation between the two variables was strong with r=0.718. As per the third objective this study demonstrated that there is moderate relationship between taxpayers training and VAT collection performance. Statistically, the increase of one unit in taxpayers training increases the VAT collection performance by .130 units if other variables stay constant. The indispensable role of taxpayers training in VAT collection performance has been proved by its p-value (0.44) which showed that it can’t be ignored in the model without affecting deeply the accuracy of the prediction by the model.
At the end of this study some recommendations should be given to whom it may concern especially to researchers and decision makers.
a. VAT collection agency and decision makers should take into consideration the importance use of EBM in revenue collection by increasing the number of taxpayers registered in VAT and consequently increasing the number of taxpayers using EBM.
b. Administrative fines revealed to be an important factor in VAT collection, thus the agency in charge of VAT collection should emphasize on audit to prevent tax fraud and to penalize those who have not goodwill to pay VAT.
c. Taxpayers must be trained regarding paying taxes especially VAT and the use of EBM.
RRA must inform taxpayers regarding the fines incurred in any case of no-compliance in VAT declaration or/and payment.
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