Mozambique to get $350 mln in tax from gas deal: How to use this money?

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Mozambique to get $350 mln in tax from gas deal: How to use this money?

4:30 CAT | 23 Mar 2017

The Mozambican government is expected to net US$350 million in tax from the sale of shares of Italian energy group ENI to North American Exxon Mobil. Analyst suggests how to use money.

US oil company Exxon Mobil is expected to pay US$2.8 billion for 25 percent of the Italian group ENI’s shares in the Coral oil and gas research and production field in Area 4 of northern Mozambique’s Rovuma Basin.

According to Anibal Mbalango, coordinator for extractive industry at the Mozambique Tax Authority, the state is expected to collect US$350 million in capital gains tax.

Schiffsplattform Saipem 10K — ENI sold 25 percent stake in Rovuma Basin Area 4 to Exxon Mobil

Mbalango told a press conference on Tuesday that only 50 percent of ENI’s surplus value is subject to tax in Mozambique because the Italian group has no tax residence in the country.

“The taxable capital is subject to a rate of 32 percent,” Mbalango said, adding that the final amount would only be settled when the sale of the shares was completed, with the “authorisation of the Mozambican authorities as well as of the other Coral Field partners”.

What to do with the money?

In an interview with DW Africa, analyst Ericino de Salema says that the announced value of US$350 million is in line with what some experts had already predicted as the outcome of capital gain taxation on the deal. But “it would be good news that economists and research centers could do independent calculations,” he says.

De Salema said that the amount could be used to cover the public deficit. “‘A fortiori’, I may infer that this money could be used to cover this year’s deficit. As you know, there is a deficit of about US$500 million,” he said.

It will, however, be necessary to discuss the possible applications of the money, publicly he added, and that “Parliament should be taking the final decision.”

Some argue, for example, that capital gains should be used to create a sovereign fund. Ericino de Salema believes that, given the current economic situation in the country, it would be difficult to take up this option immediately, although we could begin to discuss the matter.

Source: Deutsche Welle