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Rwanda has announced significant tax increases and new levies to bolster domestic revenue amid threats of aid suspension from Western nations over its alleged support for the M23 rebel group in the Democratic Republic of Congo (DRC).

The Ministry of Finance and Economic Planning detailed these fiscal measures in a policy reform note released on February 11, 2025.

Key Tax Reforms:

• Excise Duty on Cosmetics and Beauty Products: A 15% tax on the cost, insurance, and freight (CIF) value of items such as makeup, body lotions, and hair products.
• Fuel Levy: Transition from a fixed charge of 115 Rwandan Francs per liter to 15% of the CIF value to enhance funding for road maintenance.
• Vehicle Registration Fees: Increased fees across all vehicle categories, including electric vehicles.
• Gambling Tax Hike: The Gross Gambling Revenue (GGR) tax has risen from 13% to 40%, and withholding tax on winnings has increased from 15% to 25%.
• Value-Added Tax (VAT) on Mobile Phones and ICT Equipment: Reintroduction of VAT after years of exemptions aimed at promoting digital penetration.
• Tourism Levy: A new 3% levy on accommodation costs to support tourism investments.
• Excise Duty Increases: Significant hikes on cigarettes (36%), beer (5%), and airtime (gradually rising to 15%).

These measures are part of Rwanda’s National Strategy for Transformation (NST2), which aims to achieve economic self-reliance and reduce dependence on foreign aid.

The United States, the United Kingdom, and the Netherlands have previously suspended or withheld aid to Rwanda due to concerns over its alleged support for M23 rebels in the DRC.

In 2012, the U.S. cut $200,000 in military aid to Rwanda over similar allegations.

Despite these challenges, Rwanda has been working to reduce its reliance on foreign aid by expanding its tax base and strengthening economic ties with non-Western partners, such as China and the United Arab Emirates.

Analysts note that Rwanda’s evolving stature as a political and economic player has diminished global leverage over its policies. The country’s strategic importance and contributions to international peacekeeping missions have made the international community more reluctant to exert pressure, despite ongoing conflicts in the DRC.

As Rwanda implements these tax reforms, the government aims to strengthen its fiscal position and maintain economic stability in the face of potential reductions in foreign aid.