‘Pacta sunt servanda’: Mega-project contracts in Mozambique “must be scrupulously fulfilled” – director of APIEX

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‘Pacta sunt servanda’: Mega-project contracts in Mozambique “must be scrupulously fulfilled” – director of APIEX

12:02 CAT | 19 Jun 2018

Photo: A Verdade

The director general of the Agency for the Promotion of Investment and Exports (APIEX) told tax collectors on Monday that: “With regard to granting of tax benefits and the possibility of them being reduced, my opinion is very clear: that this is an untimely debate at this moment and it can even be argued as one devoid of any logic whatsoever.”

Officials from the Tax Authority (TA), which is responsible for collecting revenues to meet the deficit budget resulting from the cut in direct aid from cooperation partners, publicly expressed their doubts about the real gains that the Mozambican economy had obtained since megaprojects with large state-provided tax benefits began.

At-aly-mala

Speaking on behalf of the Tax Authority, Director General of Customs Aly Mallá said that it was urgent to create a database and exchange information among stakeholders regarding project registrations, location, investment value, period of recovery of the investment, fiscal expenses, taxes paid, jobs and paid remunerations and so on.

Lourenço Sambo, APIEX director general and one of the authors of the Tax Benefits legislation, gave a lecture on the subject which began by tracing the history of the legal framework regulating private investments in Mozambique since January 1987, which has undergone several improvements including the recent revisions of the Oil and Mining Laws.

“There is often an understanding that incentives constitute an expenditure for the investor and the government. I would say incentives are an investment that the government makes by not charging a certain fee, which is why we have exemptions from certain customs duties” Sambo explained, citing as examples the incentives in terms of Value Added Tax on the importation of equipment and assessments in Class K of the Customs Tariff, tax credits for investment and the accelerated rebates and deferral of payment of corporate income tax.

“Passionate opinions are raised in order to renegotiate contracts previously concluded”

Foto da Autoridade TributÃ¡ria de MoÃ§ambique

However, the APIEX director, whose job is to actively seek investments, said that “there is an intense debate about the true contribution of ongoing projects as well as those whose implementation is nearing. Specifically, voices are raised against fiscal incentives and even foreign exchange policies”, alluding to the positions maintained by the Institute for Social and Economic Studies, the Centre for Public Integrity and even the International Monetary Fund.

“They also question the gains for the Mozambican economy, especially as concerns the collection of the product, the distribution of wealth and the satisfaction of local populations. There are passionate please to renegotiate previously concluded contracts, and even more radical options such as the unilateral termination of contracts followed by nationalisation and expropriations. I am saying that this is not the path. More serious still is what occurs when the resettlement of affected populations is called into question,” Sambo said.

From Sambo’s point of view, the debate is on the cutting edge. “Positions are defined, and their defenders and detractors constantly exchange arguments of the most varied nature, always trying to counter their opponents. Although, let me stress, the scientific and legal basis of the arguments sometimes leave much to be desired.”

“Any lack of predictability in legal terms could cost the country a very long delay”

“The analysis we must make when we talk about tax benefits must unquestionably begin with the principle of respect for contracts entered into by the state. It is important that in a state of law there is respect for what was agreed, and this is already dictated in the old Latin saying, “Pacta sunt servanda”. That is: contracts must be observed, and the government must to comply.”

Lourenço Sambo made his position clear. A Verdade reports that it seemed to reflect the position of the successive Frelimo governments: “With regard to the granting of tax benefits and the possibility of them being reduced, my opinion is very clear: this is an untimely debate, and one can even argue that it is devoid of any logic whatsoever.”

“It is necessary to look at the historical processes of granting fiscal benefits as an economic policy of the Mozambican state in attracting and promoting domestic and foreign investment. We must take into account that we are in a region, we are in a global world, and that the investor has several options. Any scramble or lack of predictability in legal terms could cost the country very dearly.”

By Adérito Caldeira

Source: A Verdade