Mozambique prepares Tax Administration reform, with focus on mining and hydrocarbons – IMF

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Mozambique prepares Tax Administration reform, with focus on mining and hydrocarbons – IMF

3:54 CAT | 17 Jul 2023

Image: Lusa

The Mozambican executive is preparing a reform of the organic structure of the Tax Administration (AT), foreseeing the creation of a risk management commission, with a focus on mining and the taxation of hydrocarbons.

“The AT has prepared a reform to modernise its structure and continues to progress in gathering and cross-checking third-party information to increase taxpayer compliance and enforce tax arrears collection,” declares a report by the International Monetary Fund (IMF), on the commitments assumed by the Government of Mozambique within the framework of the revision of the Expanded Financing Program.

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According to the document, “the reform proposal for the internal organisation structure of the AT is expected to be approved by the Council of Ministers by end-July 2023”.

“The organisation structure will integrate the risk management committee created to strengthen compliance, and design procedures for taxes and customs across all value chains, with a focus on mining and gas taxation,” it adds.

The same report points out that the Ministry of Economy and Finance (MEF) “is committed to addressing the deficiencies in the VAT refund mechanism and to clear accumulated arrears”.

“MEF will draft a strategy to clear the current stock of VAT refund arrears (amounting to MTS 39 billion),” it clarifies.

The IMF also stresses that “the government is adhering to its commitment in the 2023 budget to retain 16.5 percent of the share of VAT gross collection for the payment of refunds, to ensure sufficient resources are available for refunds and avoid any further accumulation of arrears”.

On July 6th, the IMF approved the second revision of the Expanded Financing Program for Mozambique, guaranteeing a disbursement of US$60.6 million, and revised its estimate of gross domestic product (GDP) growth from 5% to 7%.

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This approval means that Mozambique will receive US$212.09 million, out of a total of US$470 million announced in May 2022.

In its macroeconomic forecasts for this year, the IMF foresees an acceleration of the country’s GDP growth from 4.2% in 2022 to 7% this year, anticipating that, at the end of 2023, inflation will have dropped from 10.3% to 6.7%, the same as in 2021, but still almost double the previous two years.

The country’s debt-to-GDP ratio should continue on a downward path and reach 89.7% at the end of this year, compared to the 95.5% recorded last year.

READ: Mozambique must reduce wage bill to invest in priority areas – IMF

Source: Diario Economico