the following is a takeaway for third chapter: A tax expenditure is the reduction in government revenue resulting from preferential tax treatments such as exemptions, deductions, or reduced tax rates granted to certain groups, sectors, or activities. In Rwanda, according to the Ministry of Finance and Economic Planning (MINECOFIN), it represents tax revenue forgone through legal provisions such as VAT exemptions and zero-rating, income tax holidays, and preferential rates. Tax expenditures act as indirect government spending aimed at promoting specific economic and social goals. The main types include tax credits (which directly reduce tax payable), tax deductions (which lower taxable income), preferential tax rates, tax deferrals (which delay payment), industry-specific incentives, international tax provisions, and housing-related tax incentives designed to encourage homeownership and investment.
Tax expenditures are important tools used by governments to promote investment and economic growth, support small and medium-sized enterprises, reduce poverty, encourage environmental conservation, and attract foreign direct investment. In Rwanda, their rationale includes improving the affordability of essential goods such as healthcare and education, addressing administrative difficulties in taxing certain sectors like financial services, promoting regional integration within the East African Community (EAC), supporting the development of priority sectors such as transport, and attracting investment that fosters job creation, technology transfer, and local production.
- Teacher: MUGARAGU GIRANEZA MUGARAGU