Assessing the effectiveness of value-added taxation reforms on small and medium enterprises performance in Rwanda: A case study RRA in Nyarugenge District

This research paper describes the potential gains and pitfalls of Value Added Tax (VAT) reforms for Small and Medium Enterprises (SMEs) in Rwanda. Efficiency and productivity: By reducing administrative burdens, VAT reforms can help SMEs focus on their core business activities, which can lead to improved profitability. However, the effectiveness of these reforms is contested, both in terms of their practical application and their different impacts. The study focuses on testing the impact of VAT reforms on SME performance in Rwanda for the following: impact of changes in the VAT rate, VAT registration reforms, and increasing use of a digital VAT system. The theoretical research framework for this study was based on the theory of tax compliance and the technology acceptance model. The current study was conducted by using a descriptive research design. In this study, the target population was 19,733 Small and Medium Enterprises (SMEs) of Nyarugenge District. In fact, the researcher used stratified random sampling to get a sample of 99 SMEs. Primary data is considered to be more reliable and adaptive and is usually acquired through questionnaires and interviews. Descriptive statistics and inferential statistical methods were applied using SPSS for its highly effective analytic capability. Results indicate that VAT rate reforms influence (M = 3.89; SD = 1.198) the performance of SMEs, VAT registration reforms influence (M = 3.67; SD = 1.287) the performance of SMEs, and VAT rate reforms influence (M = 3.87; SD = 1.290) the performance of SMEs. The study concludes that the predictors of SME performance in Rwanda are VAT rate reforms, VAT registration reforms, and VAT digital system reforms. It suggests that tax managers need to provide a support mechanism to SMEs in the transition period after VAT reforms. This includes financial literacy training and support for tax compliance. In addition, they should offer training and guidance to SMEs to help them understand the new VAT rules and regulations. Further, they should offer resources and guidance to help empower the SME businesses to maximise the benefits of the reforms.