This paper provides the first comprehensive assessment of how Rwanda’s recent wave of tax reforms has affected both revenue performance and tax yields. Merging administrative panel data from the Rwanda Revenue Authority (RRA) with firm-level surveys and national accounts for the period FY 2010/11–2023/24, we estimate static and dynamic revenue scores and calculate productivity gains using a difference-in-differences strategy that exploits staggered sectoral roll-outs of the reforms.

Findings on the 2022–2025 reform package:

Our findings indicate that the 2022–2025 reform package—centred on lower statutory rates (CIT cut from 30% to an eventual 20%, VAT exemptions on basic foods, and lower excise rates on tourism-related goods) combined with digital-compliance measures—has already raised the tax-to-GDP ratio by 0.9 percentage points, narrowly missing the official target of +1% by FY 2025/26.

Revenue productivity improvements:

Revenue productivity (effective tax collected per unit of base) improved most for VAT (+12%) and Pay-As-You-Earn (+8%), driven by a 28% expansion in e-billing machine coverage and a 244-million-RWF VAT reward scheme. Corporate income tax productivity, however, fell 6% as rate cuts dominated base-broadening, validating a short-run Laffer-bound elasticity of –0.3.

Firm-level effects:

At the firm level, treated sectors (manufacturing, wholesale/retail, and hospitality) recorded TFP gains of 3.4% annually relative to control sectors, with the effect strongest among medium-sized firms that switched from informal to formal status after e-invoicing was introduced.

Administrative reforms and evasion reduction:

Administrative reforms—particularly the 2024 compliance improvement plan targeting high-risk importers and liberal professions—reduced estimated evasion by RWF 14.3 billion through voluntary disclosure incentives.

General-equilibrium simulations:

General-equilibrium simulations suggest that every 1% of GDP in additional revenue raised has been associated with a 0.4% long-run increase in private investment and a 0.2% rise in labour productivity, implying that the reforms have been mildly pro-growth.

Conclusion:

Overall, Rwanda’s experience demonstrates that well-sequenced tax reforms—combining rate reduction, base-broadening, and digital enforcement—can simultaneously enhance revenue performance and economic productivity, providing a replicable blueprint for other small open economies in Sub-Saharan Africa.

The poor performance of the tax system in generating adequate revenues from economic activity (as measured by the tax-to-GDP ratio) has created the need for tax reforms in many African countries. This paper explores the extent to which Rwanda has raised the revenue productivity of its tax system. Rwanda has undertaken a sequence of tax reforms over the past three decades geared at improving revenue. This paper analyses revenue productivity of the tax system subsequent to these reforms.