Mozambique: Definitive approval of VAT exemptions – AIM report

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Mozambique: Definitive approval of VAT exemptions – AIM report

4:45 CAT | 25 May 2020

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

The Mozambican parliament, the Assembly of the Republic, on Monday passed the second and final reading of a government bill that will exempt sugar, vegetable oil and soap from Value Added Tax (VAT).

These goods had been exempted from VAT for more than a decade, but the exemption expired on 31 December 2019. As from January, VAT at the standard rate of 17 per cent has been slapped onto sugar, oil and soap, and the imported materials, equipment and spare parts used by the Mozambican industries making these goods.

The reinstated exemption will last until 31 December this year. It is justified on the grounds that it will reduce the economic and social impact on households caused by the Covid-19 pandemic.

The Minister of Economy and Finance, Adriano Maleiane, told the Assembly the bill “intends to ensure the availability of soap, sugar and vegetable oil, improving hygiene and food security, reducing the cost of living with regard to those goods, and supporting Mozambican industries, so as to reduce dependence on importing these goods”.

The bill was entirely uncontroversial, and so all deputies from the two opposition parties, Renamo and the Mozambique Democratic Movement (MDM) joined the ruling Frelimo Party in voting for it.

Other consumer goods regarded as essential are already exempt from VAT – including maize and maize flour, rice, wheat, bread, iodated salt, powdered milk for infants, tomatoes, potatoes, onions, kerosene and cooking gas.

Maleiane also told the deputies that, as from June, the price of electricity, for all consumers on the general tariff, will be cut by ten per cent. He justified this measure too as a means of mitigating the impact of Covid-19.

He admitted that this price cut will cost the publicly owned electricity company EDM more than 68 million meticais (around a million US dollars, at current exchange rates) this year. This unexpected loss of income will certainly affect EDM’s plans for further rural electrification.

Source: AIM