Mozambique: Double taxation agreements in the extractive sector penalise the country – AIM

Login

Register

http://www.clubofmozambique.com/

Mozambique: Double taxation agreements in the extractive sector penalise the country – AIM

6:01 CAT | 10 Jul 2023

FILE - For illustration purposes only. [File photo: Notícias]

A prominent Mozambican NGO, the Centre for Democracy and Development (CDD), believes that double taxation agreements in the extractive sector penalise the country.

According to the research, unveiled recently and published by CDD, in 2021 alone, Mozambique lost 315 million US dollars in double taxation agreements with two tax havens, namely Mauritius and the United Arab Emirates, an amount equivalent to 7.4 percent of the country’s tax revenue.

“Mauritius and the United Arab Emirates are used by companies operating in the extractive sector in the country to evade paying taxes, at the cost of the double taxation agreements that exist between these countries and Mozambique. In these countries multinationals create front companies that are later used to evade taxes”, says the CDD study.

According to CDD, the elimination of these agreements could mobilize more revenue for the State, which would be useful for the health, education and social protection sectors.

“Double taxation agreements are not the only problems that the country faces in tax evasion in the extractive sector”, says the research, adding that “in Mozambique, there are still illicit financial flows from the tax avoidance strategies of multinational companies”. The CDD estimates annual losses of 2.2 per cent of Mozambique’s Gross Domestic Product (GDP), exceeding the African average, which is 0.7 percent.

“This shows how vulnerable Mozambique is to both corruption and cross-border illicit activities”, the researchers explain.

However, says the study, in 2022, Mozambique initiated a very positive step in its revenue sharing mechanism, which now allocates 10 percent of royalties related to natural resource exploration to the development of the provinces, where extraction takes place.

“Challenges still persist related to the disclosure of information by companies that exploit mineral and natural resources in the country. A significant number of companies operating in the extractive sector continue to fail to provide information of public interest, such as fiscal and environmental information and local content programmes,” warns the CDD.

Source: AIM