Mozambique government says removal of VAT exemption on oil and soap will remain

The Mozambican government this Saturday guaranteed that the end of the VAT exemption on oil and soap, in place from the end of 2023 until the end of 15 years, will be maintained, claiming that companies have not taken advantage of this opportunity.

“We are not going to grant a VAT exemption again,” said Industry and Trade Minister Silvino Moreira, answering a question from journalists in Maputo on the sidelines of a public event about the repeal of the existing measure. for 15 years.

“The opportunity that the government gave, unfortunately, did not benefit the consumer. And we want the industry to understand that it needs to work,” a government official said.

Entrepreneurs in this sector publicly stated back in December that the then possibility of ending the VAT exemption regime in 2024, which was realized on the last day of the year, for these national products would jeopardize the future of these industries. encouraging the import of cheaper products without the same quality, in addition to the price increases that have since occurred on these staples of the food basket.

In December, in the Ministry of Economy and Finance’s response to parliamentary committees on the then proposed Economic and Social Plan and State Budget (PESOE) for 2024, the government said that, as part of the “tax base broadening process”, it was assessing “the rationality and impact of the exemptions granted in each tax legislation, at the industry level and in the tax incentive code.”

He expected the process to include “sensitivity analyses, cost-benefit and economic impact analyses, and comparative law analyzes 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 the purpose of protecting national industry, stimulating competitiveness and reducing the impact on the selling price for the end consumer,” the response added.

“If, after 15 years of tax exemption, there is no competitiveness, then this should not be a fiscal problem, but rather a problem of distortions in the pricing process, where a certain group of producers still does not have a clear definition of their profit margin,” the document says. still in the position of the Ministry of Economy and Finance.

He adds that the analysis carried out on this exemption found that “they did not reduce the pressure on average annual inflation” during the period in which it was in force: “The exemption was 7.6.” %, and prices for these products increased on average above inflation, by about 10%.”

The government’s position tabled in Parliament also states 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 such measures practiced in other countries.”