Mozambique: NGO wants rethink of tax breaks for extractive sector as Vale exits

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Mozambique: NGO wants rethink of tax breaks for extractive sector as Vale exits

5:05 CAT | 28 Jan 2021

File photo: Noticias

Mozambique’s Centre for Public Integrity (CIP), a non-governmental organisation, said on Thursday that the government should rethink tax benefits granted to companies operating in the extractive industries after Vale, a Brazil-based multinational, announced that it was pulling out of the country.

In a review of the announcement by Vale, which for a decade mined coal from central Mozambique for export, the CIP makes a number of recommendations to the authorities, including “an in-depth cost-benefit analysis” of tax exemptions granted to firms in the sector.

It also advocates greater oversight and cost control, the establishment of the High Authority on Extractive Industries (AAIE) – already foreseen in legislation – to strengthen the monitoring of companies’ operations, and the disclosure of the price of the sale by Japan’s Mitsui of its local assets to Vale.

Last week Vale signed a memorandum of understanding with Mitsui, its partner in the country, “allowing both parties to structure Mitsui’s exit from the Moatize coal mine and the Nacala Logistics Corridor (NLC) as a first step towards Vale’s divestment of the coal business.”

Vale has the declared aim of being carbon neutral by 2050 and of reducing some of its main sources of such pollution by 2030, as a result of which it is seeking buyers for its coal business in Mozambique.

The announcement raises questions “that need to be carefully considered,” argues the CIP, “to prevent multinational companies from closing down without contributing to the economy with existing potential.”

During the years – 2011 to 2019 – in which Vale had production in Mozambique, the country granted 4.6 billion meticais (€59 million) in exemptions from production tax, the NGO notes, citing Vale’s own figures. It adds that there will also have been other breaks relating to corporate income tax and other levies that have not been disclosed.

In its announcement last week, Vale said that the withdrawal would “safeguard the rights of workers and the communities where the company operates” and foresaw “the identification of a new investor with good standing and recognized capacity to conduct the project.”

Mozambique’s Confederation of Economic Associations (CTA), the country’s main business confederation, would like to see “the creation of a special commission to monitor the process in order to safeguard national interests,” its president, Agostinho Vuma, said on Wednesday.

Source: Lusa