The Mozambique government will reassess in 2024 the continuity of VAT exemption for certain products, namely oil and soap, arguing that after 15 years it will have no impact on prices and the competitiveness of national companies.
“The Government plans to review the process for extending these benefits, taking into account the economic moment and opportunities in which they are implemented, and determine the best way to stimulate the competitiveness of the sector and the best approach to protecting consumers and low-cost goods. family income income,” says the Ministry of Economy in its response to parliamentary committees on the proposal for the Economic and Social Plan and State Budget (PESOE) for 2024.
In a document that Lusa had access to this Friday, the government adds that as part of the “tax base broadening process” it is assessing “the rationality and impact of the exemptions granted in each of the tax legislations.” at the industry level and in the Tax Incentives Code,” a process that “goes through sensitivity analysis, cost-benefit and economic impact analysis, and comparative law analysis at the regional level.”
“It is within this framework that the VAT exemption for oils and soaps, as well as raw materials, intermediate products, parts, equipment and components used in their production, was approved for the first time by Law No. 32/2007, from December 31 and extended for approximately 15 years from with the aim of protecting national industry, promoting competitiveness and reducing the impact on the selling price for the end consumer,” he adds.
Businessmen in the industry have already publicly stated that the possibility of abolishing the VAT exemption regime in 2024 for these national products calls into question the future of these industries and will stimulate the import of cheaper products that do not have the same quality.
“It is important to note that the exemption has been in effect for over fifteen years. If after 15 years of liberation there is no competitiveness, this should not be a fiscal problem, if not a problem of distortions in the pricing process, where a certain group of producers has not yet clearly determined the size of their profits,” the Ministry of Economy and Finance said in the same response.
He adds that the analysis carried out on these exemptions, which are aimed at guaranteeing “the stability of the core basket, stimulating national industrial competitiveness and preserving jobs”, found that “they do not alleviate the pressure to increase average annual inflation” during the period in which it was in force”: “The benefit was 7.6%, and prices for these products on average rose above inflation by about 10%.”
It also said that comparative analysis in the region “suggests that Mozambique has a very large number of exceptions” compared to other countries, pointing to “a list of approximately 50 goods and services, including raw materials, intermediate products, parts, equipment and components used in production,” compared with “an average of 15–20 components used in other countries.”
“Consequently, the government, aware of the consequences of the removal of benefits, has in its portfolio a set of combined measures to protect national industry, stimulate investment and protect the purchasing power of low-income families,” the same response says.
Author: Lusa
Source: CM Jornal
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