Mozambique: State has received $16.5M this year from UN emergency response fund
Voa (File photo)
The excessive tax benefits that cost the state more than US$400 million a year continue to divide opinions in Mozambique. The government says they are aimed at job creation, while economists consider them unnecessary and likely to offer cover for corruption.
Several economists told VOA said that the policies the Mozambican government is following are moving money out of the country, but officials say tax benefits are needed to attract investment.
All projects approved under the Investment Law are exempt from customs duties and Value Added Tax (VAT) on the importation of equipment in class K of the Customs Tariff, for example.
Investments in the city of Maputo enjoy a five-year reduction in the collection of Corporate Income Tax in relation to the total investment amount. The other provinces receive 10 per cent of this deduction.
Economists admit that the US$400 million that the country loses each year as a result of tax breaks would not provide for all of Mozambique’s needs, but say it could do much.
For economist João Mosca, the argument that tax breaks attract investments is not true, because Mozambique has good gas and coal reserves, “and investors will always come if there are good governance practices and fiscal policies similar to those practiced in other countries”.
Mosca points out that certain rates of taxation could be applied, provided that this ensures that the company which pays these preferential rates has a comparative advantage in gas exploitation, for example, compared to its exploitation of other deposits, because there are more deposits that are not being explored.
Figures from the Center for Investment Promotion indicate that the volume of investments in Mozambique in 2015 was about US$6 billion.
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