Using robust evidence to build Rwanda's tax reform package

Summary

In February 2025, the Government of Rwanda agreed a comprehensive tax policy reform package aligned with priorities set out in its 2021–2024 Medium-Term Revenue Strategy (MTRS). The reforms span excise duties, VAT, and other levies and fees, affecting sectors including consumer goods, transport, financial services, tourism, and environmentally-relevant products.

To underpin the success of the reforms, the Ministry of Finance and Economic Planning (MINECOFIN) built a strong evidence base over several years. Through long-standing collaboration with MINECOFIN, TaxDev provided analytical and technical support for the appraisal of multiple reform measures, contributing to policy design and the legislative proposals subsequently approved by Cabinet and Parliament. While it is too early to fully quantify the revenue impacts, at the time the reforms were expected to  increase revenues by over 1% of GDP in FY 2025/2026, broaden the tax base, and support greater fiscal resilience.

The policy challenge

Over the past three decades, Rwanda has achieved sustained economic growth alongside significant improvements in key human development indicators, supported by public investment in health, education, infrastructure, and social protection — financed through a combination of domestic revenues and external support.

As the Government implements its Second National Strategy for Transformation (NST2), expanding the tax base and reducing reliance on external financing are central policy objectives. At the same time, as the economy has evolved, elements of the tax system have required updating to reflect changing consumption patterns, market structures, and policy priorities, including greater integration of environmental and public health objectives.

Under its MTRS, the Government undertook a comprehensive review of the tax policy framework to mobilise additional revenues while maintaining consistency with broader economic and social goals.

The impact

TaxDev worked closely with MINECOFIN analysts using our policy costing and appraisal framework to assess different reform options. Given the inherent trade-offs in tax policy design, the appraisal process provided a structured approach to evaluating revenue potential, distributional effects, behavioural responses, and administrative feasibility. It also supported decisions on the design, calibration, and sequencing of measures.

This analytical work informed multiple components of the reform package. Analysis of a proposed tourism levy drew on international experience to assess expected revenues relative to potential effects on visitor demand. Appraisal of hybrid vehicle taxation options examined alternative incentive structures and their implications for revenue and environmental objectives. TaxDev also supported the development and updating of an excise tax model, which informed multiple rounds of policy discussion on excise reforms, including beer excise duties. Collaboratively produced policy notes and briefings informed legislative proposals later debated and approved by Cabinet and Parliament.

While it is too early to assess the full revenue impact of the reforms, the process demonstrated how rigorous analytical support can strengthen the quality of policy design and build the evidence base for government-led reform.

“The government’s approval of this significant reform package is not typical, and it relied on a lot of information to be prepared over a number of years. As a relatively new directorate with ambitions to be highly evidence-driven, we are proud to have provided that when advising our Minister. 

We are also aware this is one part of a journey – there is a need to understand the actual impact of these reforms and learn from it. TaxDev’s technical support has been invaluable and we are counting on it going forward.”

Abel Ntegano, Director General of Tax Policy, MINECOFIN

Lessons and next steps

Several lessons from Rwanda's 2025 tax reform experience may be relevant for other countries:

• Clear articulation of policy goals matters. Explicitly stating what a reform is trying to achieve helps policymakers to assess whether proposed measures are likely to meet their objectives, and supports more focused analytical work.
• Structured appraisal processes clarify trade-offs and support consensus-building. Rigorous analysis enables transparent discussion of the potential revenue, equity, behavioural, and administrative implications of reform options, making it easier to build agreement around complex decisions.
• Design and sequencing matter. Careful calibration and phasing of reforms helps to manage potential fiscal, economic, and political risks.

Looking ahead, priorities include further refinement of analytical tools and ongoing assessment of tax policy in line with Rwanda’s MTRS 2, and as its economy continues to evolve. TaxDev will continue to provide analytical and advisory support to MINECOFIN and other partner governments. Rwanda's experience illustrates how evidence-informed, government-led tax reform — grounded in structured appraisal and close collaboration between government analysts and external partners — can strengthen fiscal frameworks and support long-term development objectives.